The global stock market continues to fall day after day as fears of austerity surge. Stock markets in major countries have been on a downward trajectory since the beginning of the year as global austerity movements led by the US Federal Reserve (Fed) and fears of stagflation (inflation rises amid a recession) are added.
Analysts in the New York Stock Exchange said the market was still volatile and expected inflationary pressures to continue for the time being. Ian Linden, head of U.S. interest rates at BMO, told CNBC on the 11th (local time) that “This indicator is a risk asset because it is expected to extend beyond the 50bp rate hike in June and July that the Fed has already predicted. “I was under this downward pressure,” he said. “The inconvenient truth is the need for the Fed to raise rates faster and to a higher level than many hoped,” said Chris Zakallelli, chief investment officer at the Independent Advisors Alliance.
East and West Hak Ants invest 220 trillion won in stock market after Corona
It was confirmed that the funds poured into the stock market by the so-called Donghak and Seohak ants exceeded 220 trillion won as the stock investment boom started after the novel coronavirus infection (Corona 19).
According to the Korea Exchange and the Korea Securities Depository on the 12th, the amount of net purchases of domestic and overseas stocks by individual investors from the beginning of 2020 when the Corona 19 epidemic began to the present (as of the 6th) was 226.1 trillion won. During this period, individual net purchases in the domestic stock market amounted to 165.2 trillion won. Individuals poured 132.2 trillion won into the stock market and 33 trillion won for the KOSDAQ market.
Individual investors net bought 76.9 trillion won worth of domestic stocks last year, the largest ever. In 2020, the first year of the COVID-19 pandemic, it bought 63.9 trillion won worth of money. Samsung Electronics is by far the stock that individuals bought the most in domestic and foreign stock markets. After the coronavirus, individual investors net bought Samsung Electronics worth 51.8 trillion won. During this period, individuals net bought 12.5 trillion won worth of Samsung Electronics’ preferred stock. Individuals’ net purchases of Samsung Electronics stocks, including common stock and preferred stock alone, amounted to a whopping 64.2 trillion won. Nearly 40% of individual stock market net purchases went to Samsung Electronics.
In addition, individuals net bought Kakao and Naver, each of the major domestic big tech companies, worth 5.8 trillion won, respectively, and Hyundai Motor (5.7 trillion won), Hyundai Mobis (4 trillion won), SK Hynix (3.9 trillion won), and LG Electronics (2.2 trillion won) 100 billion won) and Korea Electric Power (2.1 trillion won) also net bought more than 2 trillion won.
The increase in net purchases of foreign stocks after COVID-19 is even greater. From the beginning of 2020 to the 6th, the amount of net purchases and settlements of overseas stocks by domestic investors through the Korea Securities Depositary was $52.23 billion. Converted to the exchange rate at the end of each year (as of the 6th this year), it is about 61 trillion won in Korean Won. The amount of individual net purchases of overseas stocks, which was only $1.57 billion in 2018 and $2.51 billion in 2019, has exploded since the pandemic. In the following year, 2020, it jumped to $19.73 billion, an eight-fold increase from a year earlier. Last year, it increased even more, and investors poured $21.86 billion (about 26 trillion won) into overseas stocks.
Even this year, the ants net bought US$10.6 billion (about 13.5 trillion won) of overseas stocks, exceeding half of last year’s net purchases. Tesla was the top net buyer of foreign stocks, and the ants bought $7.22 billion worth of Tesla stock during this period. Apple ($3.2 billion) and Alphabet ($1.65 billion) were also on the top net buying list.
Individual net buying top stocks drop one after another
In the booming stock market, many individual investors who had fun with stock investment until last year seem to have accepted the bitter report this year.
The KOSPI, which set a new all-time high of 3,305 last year, showed a sluggish trend in the second half of the year. It is the first time in 17 months since November 2020 that the KOSPI closed below the 2,600 line. The S&P 500 and the Dow Jones Industrial Average have fallen 16% and 12%, respectively, since the beginning of the year, while the tech-focused Nasdaq Composite is down nearly 25% as the austerity hit is more severe.
In particular, large-scale growth stocks, which have been heavily invested by Donghak ants and Seohak ants, have suffered a greater decline. Rising interest rates increase the discount rate on a company’s future earnings, hurting growth stocks even more. As of the 8th, the stock price of Tesla, the number one stock in Seohak Ant holdings, has fallen 24.3% since the beginning of the year. Apple, the second-largest stock in Seohak Ant net buying, fell 13% during the period, while Nvidia and Alphabet fell 40% and 21%, respectively. Amazon stock fell 35%.
Seohak ants also included a large number of exchange-traded funds (ETFs) that bet on the rising market of the US stock market, and it seems that the recent decline in major US stock indexes has taken a formidable blow. The ‘PROSHARES ULTRAPRO QQQ’ ETF is a stock held by Seohak Ant for $1.65 billion. This ETF tracks the daily fluctuation rate of the Nasdaq 100 index three times, and its price has plunged 61% from $83 to $32 since the beginning of the year. ‘Invesco QQQ Trust’, which tracks the Nasdaq 100 by 1x, and ‘SPDR SP500 Trust,’ which tracks the S&P 500, also fell by 24% and 16%, respectively.
In the domestic stock market, the top stocks in net buying by individual investors are walking downhill one after another, with Samsung Electronics down 16% and Kakao and Naver by 24% and 26%, respectively, since the beginning of the year. However, individual enthusiasm for stock investment does not appear to have subsided significantly. Individual investors net bought 25.3 trillion won worth of domestic stocks and 13.5 trillion won worth of overseas stocks this year too.
◆“Individuals have no market experience not supported by the Fed”
It was found that individual investors who led the “meme stock” craze in the US stock market during the pandemic have lost all their money in the recent downturn.
According to Bloomberg News on the 8th (local time), Morgan Stanley analyzed data on transactions and exchanges of newly opened accounts since 2020. It is estimated that all of them have been lost.
According to Bloomberg, the decline in the stock price of meme stocks, favored by individual investors, was large, and unlike institutional investors, individuals were not able to respond quickly to the downtrend. The stock price of movie theater chain AMC Entertainment, one of the representative meme stocks, has fallen by about 49% this year, and has fallen by about 78% since its peak in June last year. Home fitness company Peloton, one of the biggest beneficiaries of COVID-19, is also down more than 90% from its all-time high.
The stock price of the stocks preferred by individual investors analyzed by Goldman Sachs has plunged an average of 32% this year, more than double that of the S&P 500 Index. Individual investors, who gathered around the online community Reddit’s ‘Wall Street Bets’ chat room, led the meme stock craze, leading the surge in GameStop stock prices early last year, and once accounted for 24% of the stock market trading.
However, according to Bloomberg Intelligence, they did not significantly reduce their share of equity investments despite the recent downtrend. Although the monthly net purchase of stocks by individuals last month was only $14 billion (about 2.6 trillion won), the second lowest since the end of 2020, the share of stock holdings is still relatively high compared to institutions. In the case of hedge funds, on the other hand, institutional investors have been actively lowering their share of stocks in the face of interest rate hikes, such as reducing their share of stocks to the lowest level in two years.
Matthew Turtle, chief executive officer of Turtle Capital Management, noted that many individual investors “started investing in stocks in the era of COVID-19 and experienced only the crazy market supported by the Federal Reserve.” “They all turned around with the Fed’s change of direction last November, but they didn’t realize this because they’ve never seen a market that the Fed didn’t support,” he said.
Source: 경제 by www.segye.com.
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