Korean retail investors gobble up Japanese stocks on yen’s slump

Japanese stocks have emerged as attractive alternative investment assets to South Korean individual investors after the steeper depreciation of the Japanese currency than the Korean currency against the U.S. dollar has made the shares of Japanese companies cheaper.

According to the Korea Securities Depository (KSD) on Tuesday, domestic individuals made 5,911 orders to buy Japanese shares last month, up 1.5 times from a year ago. The figure was the highest since the KSD started compiling the related data in 2011. Their Japanese stock purchases in the month amounted to $96.78 million (138.6 billion won).

Korean investors have been showing strong appetite for Japanese stocks since April as the yen’s depreciation against the dollar has been accelerating. There is no sign of immediate recovery in the yen's value after it plunged to the 150-yen range —the lowest Japanese currency value against the U.S. dollar in 32 years.

The Korean currency has been also under downward pressure against the greenback, but the Japanese currency’s depreciation has been steeper and faster than the Korean won’s depreciation, making Japanese stocks cheaper and indicating higher yields for Korean investors.

The most favored Japanese stocks by Korean mom and pop investors are those in the semiconductor and robot sectors, such as ROHM and Keyence, because many Japanese companies have strong global presence in those two sectors, said an official in the investment services industry. Korean investors have also invested in U.S. exchange-traded funds (ETF) listed in Tokyo, such as the Listed Index Fund U.S. Equity (NASDAQ 100) Currency Hedge ETF, betting on a recovery in U.S. stocks and the Japanese yen’s value.

But some market experts warn that investors should be cautious about their investments in Japanese shares on concerns that the yen would further fall to the 160-yen level per dollar due to Japan’s weak economic fundamental and its central bank’s accommodative monetary policy that is widening the interest rate gap between Japan and other countries especially the United States.

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