Unfazed by Korean Stock Market Crash! Citi Reveals Retail Investors Keep Buying the Dip, but Optimism Is Premature

Citi's analysis reveals that Korean retail investors have been severely impacted by the recent stock market plunge, with estimated cumulative losses in domestic leveraged ETFs reaching as high as 56.3 trillion KRW. The total market capitalization of Korean leveraged ETFs has shrunk from 76.4 trillion KRW on the 22nd of last month to 27.6 trillion KRW, erasing nearly 48.7 trillion KRW in value. Despite this massive market bloodletting, retail investors have continued to pour in 9.02 trillion KRW in fresh capital, attempting to buy the dip against the trend, yet the loss deficit continues to expand.

Buying the dip amid falling prices! Unrealized losses on SK Hynix and Samsung exceed 11 trillion KRW Korean retail investors have not retreated in the face of the market's sharp correction. Since the 23rd of last month, retail investors have aggressively net purchased 23.27 trillion KRW worth of SK Hynix shares at an average purchase price as high as 2.28 million KRW, resulting in an unrealized loss of 8.3 trillion KRW on this single stock alone—representing a loss rate of 31.6%. Additionally, their simultaneous bottom-fishing strategy on Samsung Electronics has led to an unrealized loss of approximately 3.5 trillion KRW.

Margin loan balances remain elevated! Citi warns: 'Retail investors haven't sold off yet—optimism is premature' As of the 27th, the total margin loan balance across the two major markets remains high at 32.7 trillion KRW. Only 65% of the leveraged positions accumulated this year have been unwound. Mohamed Apabhai, Head of Trading Strategy for Asia-Pacific at Citi, stated: 'Retail investors have not yet begun selling off.' He noted that the correlation between margin loan balances and the KOSPI 200 index is as high as 92.2%, predicting that index futures will first fall to 888 points, and could even drop to a fair value of 754.6 points. He emphasized that Korean equities have only just exited a bubble phase and have not yet reached an undervalued range.