Individual Investors' Net Purchases Plummet to One-Tenth in Two Months

The US 10-year Treasury yield rose at one point before closing slightly lower, while the 30-year Treasury yield reached 5.26%. Despite these minor fluctuations in US Treasury yields, the market is reacting sensitively.

The 2-year Treasury yield showed volatility, falling by 0.8bp to 4.383%. The market's reaction to such interest rate changes has a significant impact on investment sentiment.

In the US stock market, AI-related stocks showed strength, with Dell soaring 15% and Nvidia rising over 3%. Micron and Qualcomm also increased by more than 2%, maintaining a positive trend for leading AI technology companies.

Despite this global AI strength, the Korean stock market has shown a relatively diminished sense of confidence.

SK Hynix's American Depositary Receipts (ADRs) have been trading at approximately 30% higher than its domestic main shares for quite some time. This reflects a tendency for the US market to value Korean semiconductor companies higher than the domestic market.

In fact, 'Seohak ants' (Korean retail investors in foreign markets) are buying SK Hynix ADRs in the US market instead of the Korean market. This price discrepancy is a factor encouraging capital movement from domestic investors to the US stock market.

While US investors are placing higher value based on their trust in Korean companies, analysis suggests that the undervaluation of the main shares in Korea has not yet been resolved.

According to Shinhan Investment & Securities' analysis, a record-high 12.5 trillion won flowed out of the domestic stock market last month. Such a massive outflow of capital in just one month is considered an extremely unusual phenomenon.

This scale of net outflow is significantly larger than during the 2008 financial crisis or the inflation period of 2021. Unlike those times of economic instability, this phenomenon is occurring amidst an assessment that the economy is entering a boom, making it even more noteworthy.

The large-scale capital outflow in a short period indicates a rapid cooling of investment sentiment in the domestic stock market and could be a factor increasing future market instability.

According to Kim Hak-kyun, Head of Research Center at Shinhan Investment & Securities, in past bear markets, indices typically fell by 30-40% over about a year. However, this time, the KOSPI index plummeted by 38% in just two months, rapidly cooling investment sentiment.

As a result of this sharp decline, individual investors' net purchases plummeted from 54.5 trillion won in June to 5.4 trillion won in July, a tenth of the previous amount. Capital withdrawn from the stock market moved to deposits, with domestic deposit balances exceeding 1,000 trillion won, clearly indicating a preference for safe assets.

Currently, institutional and individual investors in the domestic stock market are moving together, primarily focusing on Exchange Traded Funds (ETFs). Foreign investors, on the other hand, have limited buying power due to asset allocation and yen-carry trade responses.

Amidst this, 'other corporations' have emerged as the sole buying entities during the market downturn. They primarily act as a defense mechanism to prevent further market declines through share buybacks.

From January to July this year, individual investors' cumulative net purchases in the stock market exceeded 120 trillion won. This significantly surpasses the annual net purchase amount of 75 trillion won during the 2021 'Donghak Ant Movement'.

This large-scale buying by individual investors shows a different pattern from past investment behaviors and is acting as a major factor in market fluctuations.

Stock market experts anticipate that while stock prices are unlikely to see a rapid surge, they will gradually recover in stages as fundamentals improve. This forecast considers the time lag between an event's occurrence and its reflection in stock prices, as seen in the case of rising memory semiconductor prices.

Therefore, it seems important to observe the market's recovery process from a medium-to-long-term perspective rather than focusing on short-term fluctuations.

SK Group Chairman Chey Tae-won mentioned the possibility of cooperation with Japan's Kioxia, stating that various forms of collaboration, including joint production, R&D, and supply chain sharing, are being considered. This, along with his remarks about reviewing factory construction in Japan, is fueling speculation about Japanese investment.

Currently, US-based SanDisk and Kioxia maintain a close cooperative relationship, and how SK Group will build a collaborative relationship with Kioxia within this structure remains to be seen.

Currently, there is a 20-30% shortage of memory semiconductors for data centers compared to demand. Demand is increasing so rapidly that domestic production line expansion alone cannot cover this shortfall.

Consequently, the necessity of actively considering securing overseas production bases is emerging, provided sufficient infrastructure for production, such as power, water, and site conditions, can be established.

Recently, 'big players' including Korean conglomerates are actively moving to acquire long-established Japanese companies. In particular, Japanese small and medium-sized enterprises (SMEs) that possess core technologies but face difficulties in business succession are emerging as key acquisition targets.

This investment trend is interpreted as part of a strategy to integrate Japan's craftsmanship and technological prowess with domestic industries.

If SK Group and Kioxia were to merge, it is expected to cause a tremendous shift in NAND flash market share. It is suggested that their combined entity could possess significantly greater NAND business capabilities than Samsung Electronics.

While the possibility of SK withdrawing its investment in Kioxia was previously raised, Chairman Chey Tae-won's recent remarks have once again highlighted the potential for cooperation, making it a key factor for change in the global NAND market.

News has emerged that Doosan Fuel Cell has signed a fuel cell supply contract worth 500 billion won. This contract will see products delivered sequentially from the second half of this year to the first half of 2028, destined for artificial intelligence (AI) data centers in the United States.

This reflects the severe power grid bottlenecks caused by the recent surge in data centers in the US. Fuel cells are expected to play a crucial role as distributed power sources in alleviating these power shortages.

This contract holds significant meaning as it demonstrates Doosan Fuel Cell's technological prowess and contributes to building critical infrastructure for the rapidly growing AI industry.

Fuel cells generate heat during operation. This thermal energy can be linked to a heat pump system and converted for the essential cooling needs of data centers. This technology effectively manages heat, similar to the principle of air conditioners.

Such technology significantly improves the overall energy efficiency of data centers utilizing fuel cells and provides a way to optimize both power and thermal management simultaneously.

Companies actually connected to the AI supply chain are playing key roles regardless of their market ranking or size. As AI technology advances, companies with the capability to produce AI products are garnering significant attention in the market.

This suggests that connectivity with the AI supply chain is becoming a decisive factor in corporate survival and inclusion in major indices. The role and contribution within the technology supply chain are reshaping as core criteria for corporate valuation.

Therefore, companies need to focus on securing and strengthening their position within the AI technology supply chain.

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