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As Kospi reaches new heights, Korean investors redirect funds to Wall Street

Published: 09 Jan. 2026, 16:19

The Charging Bull or Wall Street Bull is pictured in the Manhattan borough of New York City, New York, on Jan. 16, 2019. [REUTERS/YONHAP]

Despite the benchmark Kospi continuing to hit record highs, Korean retail investors are cashing out. Instead, they’re sending their money to Wall Street, lured by U.S. stocks’ steadier returns, broader options and potential tax and currency advantages.

An office worker surnamed Kim, for example, sold half of their Korean stock holdings on Wednesday after the Kospi surpassed 4,600 for the first time during intraday trading.

“Prices have risen too quickly in a short time,” Kim said. “If the Kospi drops more than 5 percent from here, I’ll sell the rest and buy more of the U.S. nuclear energy stocks I’ve been investing in long term.”

While the Kospi has been on a steep upward trajectory in early 2026, Korean retail investors remain focused on the U.S. market.

According to data from the Korea Securities Depository's market information portal on Thursday, Korean retail investors were net buyers of U.S. stocks for four consecutive trading days since the start of the year. From Jan. 1 to 7, investors purchased a net $1.28 billion worth of U.S. stocks.

Both the Dow Jones Industrial Average and the S&P 500 have hit record highs in the new year, continuing their bullish trend. Though the Kospi has also reached new heights, Korean investors appear to be locking in profits at home while increasing their bets abroad.

Specialist Anthony Matesic works on the floor of the New York Stock Exchange on Jan. 8. [AP/YONHAP]

After selling off U.S. stocks in late December last year, local investors shifted gears in January. On Jan. 1 alone, they bought $504 million in U.S. equities, followed by $310 million on Wednesday — the same day the Kospi breached 4,600. In contrast, investors were net sellers of 294.6 billion won ($202.3 million) worth of shares on the Korean market that day.

Top picks among Korean investors included Tesla, Micron Technology, Palantir and Alphabet.

Analysts say volatility in Korea’s stock market is prompting retail investors to turn to the relative stability of U.S. equities.

“The Korean market is highly volatile, whereas U.S. indexes can rise 10 to 20 percent annually, barring major disruptions,” said Kim Dae-jun, a researcher at Korea Investment & Securities. “That makes U.S. stocks more appealing for mid- to long-term investors.”

The Kospi's rally has been driven primarily by heavyweight semiconductor stocks, notably Samsung Electronics and SK hynix, which limits diversification. Growth-oriented small-cap stocks on the Kosdaq have also lagged. The Kosdaq closed at 944.06, down 0.35 percent, on Thursday, marking its third straight day of losses.

“The Kospi’s rise is mostly led by Samsung and SK hynix, so investors face constraints in terms of returns and stock selection,” said Kim Sung-hwan, an analyst at Shinhan Investment. “The U.S. market offers a broader range of choices, including small-cap stocks with strong growth potential.”

The Kospi is seen at 4,611.72 points on an electric board in Hana Bank's trading room in Jung District, central Seoul, on Jan. 7, surpassing the 4,600-mark for the first time. [YONHAP]

Some analysts point to tax strategy as another factor. Korea levies capital gains taxes on overseas stock profits annually. Investors seeking to minimize taxes may have sold U.S. holdings at the end of 2025 and resumed buying in January 2026.

Expectations that the won-dollar exchange rate will rise are also driving interest in U.S. assets, as it could boost returns through currency gains.

This strong demand for U.S. equities is also pressuring the won. On Thursday, the won-dollar exchange rate rose into the 1,450 range by the market close.

In response, the Korean government plans to introduce tax incentives for "Reshoring Investment Account" accounts — designed to encourage investors to repatriate overseas investment funds into the domestic stock market. But whether these measures will be enough to sway investors remains uncertain.

“Investors will weigh whether locking up their money in Korea for a year is worth the tax breaks, or if they stand to gain more from U.S. market returns,” said Kim Dae-jun. “Ultimately, restoring the domestic market will require fundamental reforms, such as phasing out zombie companies.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY PARK YU-MI [[email protected]]