Global Economic Times

'Sell USA, Buy Korea' Re-emerges: Domestic Individual Investors Liquidate US Stocks and Return to Korean Market: Graciela Maria Reporter / Updated : 2025-05-29 21:34:24

A distinct "money movement" phenomenon is evident as domestic individual investors withdraw from US stocks and reallocate funds to Korean stocks. This trend, dubbed 'Sell USA, Buy Korea,' which briefly paused before and after the US presidential election last year, has re-emerged after seven months. It's analyzed as a complex result of increasing uncertainty in the US stock market and rising expectations for recovery in the domestic market.

Exodus of 'Seohak Geomi': First Net Selling in 7 Months

According to the Korea Securities Depository, domestic individual investors net sold a total of $1.06543 billion (approximately KRW 1.4555 trillion) in US stocks this month (May 2025). This marks a shift to net selling for the first time in seven months since October last year. Particularly last week (May 19-23), the selling trend accelerated with a net sell-off of $205.85 million.

Large-scale selling was observed even in Tesla and Nvidia, which were previously considered the most favored stocks by 'Seohak Geomi' (Korean individual investors in US stocks). Approximately $306.09 million (around KRW 418 billion) worth of shares in these two stocks alone were sold, clearly indicating a change in the investment sentiment of 'Seohak Geomi'. This can be interpreted as a move to rebalance portfolios for risk management, unlike the past tendency of strong concentration in specific tech stocks.

Return of 'Donghak Geomi': Large-Scale Net Buying in KOSPI Market

In contrast to the withdrawal of funds from the US stock market, a noticeable buying trend by 'Donghak Geomi' (Korean individual investors in domestic stocks) was observed in the domestic stock market. According to Korea Exchange data, individual investors net bought KRW 807.2 billion in the KOSPI market last week (May 19-23). This signifies the re-emergence of the 'Sell USA, Buy Korea' phenomenon.

The top three stocks most bought by individual investors were Samsung Electronics (KRW 638.2 billion), Hyundai Motor (KRW 270.4 billion), and Hanwha Solutions (KRW 118 billion). Samsung Electronics, a representative stock in the domestic market, continues to attract individual investors' consistent interest with expectations of a recovery in the semiconductor industry. For Hyundai Motor, the inflow of buying is likely due to expectations of growth in the electric vehicle market and strengthened global competitiveness. Hanwha Solutions, which operates in renewable energy sectors like solar power, seems to have benefited from investment sentiment reflecting eco-friendly themes.

'Money Move' Expected to Accelerate: Increasing US Market Uncertainty vs. Rising Korean Market Expectations

Experts believe that this 'money move' phenomenon will intensify. Han Ji-young, a researcher at Kiwoom Securities, cited increasing uncertainty in the US stock market and the creation of a positive atmosphere in the domestic market as the background for this trend.

The following factors are identified as sources of uncertainty in the US stock market:

Resurgence of Donald Trump's Tariff Risk: As the upcoming US presidential election approaches, the possibility of President Donald Trump's protectionist policies, particularly the imposition of high tariffs, is being discussed again. This raises concerns about the global trade environment, which could negatively impact corporate earnings and dampen investment sentiment.
Moody's Potential Downgrade of US Sovereign Credit Rating: Moody's, a major international credit rating agency, has indicated the possibility of downgrading the US's sovereign credit rating, bringing back concerns about US fiscal soundness. With massive national debt and budget deficits, coupled with potential additional tax cuts, concerns are growing that the US's fiscal situation could worsen further, potentially leading to a rise in US Treasury yields and increased stock market volatility.
Possibility of Prolonged High Interest Rates: The persistent uncertainty regarding the timing of the US Federal Reserve's (Fed) interest rate cuts and the prospect of a longer-than-expected high-interest rate environment are also weighing on the US stock market. High interest rates can increase corporate borrowing costs and stifle consumption, potentially leading to slower economic growth.
On the other hand, the following factors are raising expectations for an increase in the domestic stock market:

Expectations of Korean Won Appreciation: With the slight weakening of the US dollar, expectations for a stronger Korean won are forming. A stronger won makes domestic stock investments more attractive to foreign investors.
Expectations of Bank of Korea Interest Rate Cut: This week (fourth week of May), a more favorable atmosphere for an interest rate cut by the Bank of Korea's Monetary Policy Committee is increasing expectations for a rise in the domestic stock market. A benchmark interest rate cut can reduce corporate interest burdens and improve consumption and investment sentiment, positively impacting the stock market.
Optimistic Corporate Earnings Outlook: The favorable first-quarter earnings announcements from major domestic companies are raising overall expectations for improved corporate earnings. Particularly, the clear recovery in key industries like semiconductors and automobiles is expected to drive the KOSPI index higher.
Government's Value-up Program Effect: Expectations for the government's "Corporate Value-up Program" are also encouraging capital inflows into the domestic stock market. Policy support aimed at enhancing corporate value can lead to stock price increases for undervalued domestic companies, offering attractive opportunities for investors.
Implications of Different Investment Strategies: 'Seohak Geomi' and 'Donghak Geomi'
This 'Sell USA, Buy Korea' phenomenon suggests a shift in the investment strategies of domestic individual investors. In the past, there was a strong tendency to pursue high returns primarily through US tech stocks, but now, a more rational investment sentiment focused on risk diversification and the potential value of the domestic market appears to be strengthening.

However, it's important to monitor the ongoing trend of these capital flows, as it could be a short-term phenomenon. Various variables such as the global economic situation, monetary policies of central banks, and geopolitical risks all influence the investment environment. It will be crucial for individual investors to meticulously analyze these market changes and make prudent investment decisions based on their own investment principles and goals.

The focus is now on whether this "money move" will become a new driving force for the domestic stock market or simply a temporary capital shift.