June 16, 2020 / 8:29 AM / 21 days ago

South Korea's stocks go marching as ants load up

SEOUL, June 16 (Reuters) - An army of South Korean retail investors, known locally as ‘ants’, has become the biggest force in the country’s stock market, betting heavily on a recovery from the coronavirus-driven slump.

Buoyed by a more than 40% retracement since the market’s mid-March low - and a fear of missing out on more gains - the constant retail bid has ensured selloffs during the pandemic have been fleeting.

As the benchmark Kospi index plunged 4.7% on Monday, rattled by fears of a second wave outbreak, the ‘ants’ were buying shares that foreign investors and domestic pension funds dumped, market data shows.

When regional markets bounced back on Tuesday, the buying was led by retail traders who accounted for 85% of the 5.5 trillion won ($4.5 billion) worth of early trading.

“Where else would you invest now?” said 35-year old graphic designer Hong Ju-won. “I don’t want to miss out when everybody is talking about how much they’re making.”

She is part of the swarm of small investors known tongue-in-cheek as the ‘Donghak Ants Movement’, a reference to the 19th century ‘Donghak Peasant Movement’, an attempt by peasants to revolt against the rich and foreign invaders. “Another rally is coming, I still believe. I know only the ants were net buyers yesterday, but more money will join the market,” she said.

Retail investors purchased a net 29.4 trillion won worth of Kospi-listed shares between January and mid-June, Korea Exchange data shows. Foreign investors sold 24.5 trillion won and financial institutions sold 2.9 trillion won, taking a more pessimistic view of the market.

“We’re not the main player here,” said Huh Nam-kwon, head of Shinyoung Asset Management in Seoul, who manages about 10 trillion won of shares and bonds.

“Institutional investors take a more logical approach and focus on negative growth outlook, whereas retail investors are impromptu and emotional when following a rally,” Huh said.

Data from the Korea Securities Depository shows the “ants” owned 33.5% of the $1.18 trillion Kospi market at the end of 2019, while foreigners held 21.3% and pension funds and other institutions held 44.9%.

Some analysts still think the current rally will fizzle.

“It would be difficult for this kind of surge to continue. The second-wave fears are unlikely to go away anytime soon and the market could lose momentum,” said Lee Won, an analyst at Bookook Securities. ($1 = 1,213.0900 won) (Editing by Vidya Ranganathan and Richard Pullin)

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