[Money Flow] Are Korean Retail Investors Slowing Down on U.S. Stocks? 600 Billion Won Net Sold This Week

# Domestic Investors Pull Back on U.S. Tech Stocks Amid Market Uncertainty Domestic investors, who had been aggressive buyers of U.S. equities despite corrections in U.S. stock markets, have recently slowed their purchasing pace. Analysts suggest concerns over trade wars and waning enthusiasm for Big Tech stocks have prompted this change. ## Sharp Reversal in Net Trading of U.S. Stocks Data from the Korea Securities Depository shows domestic investors recorded a net sell of $407.46 million in U.S. equities during the week of April 25 to May 1. This marks a significant reversal from previous weeks when they were net buyers. The prior week, April 18 to 24, saw purchases of $897.44 million, and from April 11 to 17, they net-bought $1.046 billion of U.S. stocks. Year-to-date through May 1, domestic investors have accumulated $14.89 billion worth of U.S. equities. However, economic pressures are now curbing their appetite. ## Trade War Concerns Hamper Sentiment The U.S. economy posted an unexpected contraction of -0.3% in Q1, amidst disruptions in consumer goods supply chains and a surge in temporary imports due to tariff policies. Concerns about stagflation—high inflation and stagnant growth—are mounting. While major U.S. tech firms like Meta, Microsoft, and Apple exceeded earnings estimates, market unease over long-term tariff impacts persists. Analysts attribute this to the reliance of large tech companies on overseas hardware supply chains, such as in China and India, which are vulnerable to tariff shocks. For example, Apple expects additional costs of $900 million for the current quarter based on current tariff rates, assuming no further escalations. ## Big Tech Takes the Hit Last week, domestic investors sold off several major U.S. tech names, with Direxion Semiconductor ETFs, Tesla, Tesla-linked ETFs, Nvidia, and Palantir leading the outflows. These companies were the top five most-sold U.S. assets by domestic investors. Meanwhile, inverse funds like Direxion Semiconductor Bear 3X ETF and ProShares UltraPro Short QQQ ETF gained popularity, indicating growing pessimism about Big Tech and U.S. equities. These funds allow investors to profit from falling markets. Huh Jae-hwan, a senior analyst at Eugene Investment & Securities, said, "Domestic enthusiasm for U.S. tech stocks has waned due to declining confidence in their growth potential, as seen with Nvidia and Tesla. Tariff-related disruptions and low U.S. consumer sentiment have compounded this trend. Moreover, skepticism about U.S. tech dominance, amid China's rollout of high-efficiency AI tech like 'DeepSeek,' presents lingering challenges." ## Domestic Market Liquidity Dynamics Shift In Korea's domestic markets, investor deposit reserves rose significantly. As of April 30, reserves totaled ₩57.55 trillion ($48.72 billion), up ₩3.15 trillion ($2.67 billion) in a week. Investor deposits typically increase when stock price recovery expectations grow. The benchmark KOSPI index climbed 1.23% last week, supported by optimism that U.S. tariff tensions may have peaked. Credit-based stock investments, often referred to as "leveraged trades," also rose. Credit balance for margin trading increased by ₩283.6 billion ($240 million), reaching ₩17.56 trillion ($14.86 billion). Conversely, balances in key parking investments like Money Market Funds (MMF) saw a sharp decline; MMF holdings fell ₩8.74 trillion ($7.4 billion) over the past week to ₩213.17 trillion ($180.33 billion). Comparatively, Comprehensive Asset Management Accounts (CMA) balances remained stable at ₩87.79 trillion ($74.26 billion). As domestic and global uncertainties persist, it remains to be seen whether this trend toward diversification and caution among investors will continue in the coming months.