South Korean retail investors poured $4.5 billion into U.S. stocks in July, with a significant portion flowing into leveraged ETFs and American depositary receipts, even as domestic markets faced volatility. Experts warn of speculative risks and shifting investment strategies.
South Korean retail investors surged into U.S. markets in July, net buying $4.5 billion in U.S. securities as domestic shares faced turbulence, according to data from the UA.NEWS. The move highlights a growing divergence in investment strategies, with many investors channeling funds into leveraged ETFs and American depositary receipts (ADRs) despite warnings of speculative excess.
The Surge in U.S. Market Investment
Korean investors allocated $840 million to American depositary receipts (ADRs) of SK Hynix, the second-most-purchased U.S. security by Korean investors, even though shares of the semiconductor giant are available domestically. Owen Lamont, senior vice president of Acadian Asset Management, called the trend absolutely crazy,
noting that SK Hynix ADRs trade at a 10% premium to domestic shares and exhibit higher volatility. There's no reason for a Korean investor to buy ADRs of Korean stocks in the U.S.,
Lamont said, warning that such price discrepancies could signal speculative excess.
Leveraged ETFs and the AI Theme
Korean investors’ purchases of SOXL spiked dramatically in early August, with net buying of $662.85 million over two days, according to data from the Korea Securities Depository’s SEIBro portal. This followed a period of heavy selling, including a $664.39 million outflow on August 3. The Philadelphia Semiconductor Index rebounded sharply, climbing from July 29 to August 13, which coincided with the surge in SOXL demand. Jung In Yun, founder of Fibonacci Asset Management, suggested that traders were shifting to U.S. stocks of AI-related companies perceived as higher quality or more liquid
after losses in domestic markets.
The trend reflects broader market dynamics. Margin loan balances in South Korea fell to 27 trillion won ($26 billion) by early August, the lowest since the start of the year, according to the Korea Financial Investment Association. Meanwhile, investor deposits rebounded above 100 trillion won on August 13, signaling a cautious return to risk-taking. The irony is that if you parse the data and look at what they're buying, it's largely shares tied up in the same AI hardware theme that's been selling off in the local market,
Wool said.
Market Volatility and Global Implications
While Korean investors’ U.S. buying spree was strong but not unprecedented,
Owen Lamont noted that the scale of flows could amplify volatility in individual stocks and less liquid markets. The proliferation of leveraged ETFs across Korea, Hong Kong, and the U.S. is possibly adding volatility and magnifying market fluctuations,
Lamont said.
Experts remain divided on the long-term impact. Philip Wool argued that Korean flows are unlikely to significantly affect the broader U.S. market, which is dominated by institutional investors. However, he acknowledged that retail-driven distortions could persist in niche areas.
The coming weeks will test whether Korean investors’ U.S. bets are a lasting strategy or a reaction to short-term market conditions. With the semiconductor cycle nearing a peak and AI-driven demand fluctuating, the path of leveraged ETFs like SOXL remains uncertain. As one source noted, They are not necessarily reducing their exposure to the AI theme. They may simply be changing the geographical vehicle through which they express the same view.
