Korean investors turn to Japanese stocks on strong market, weak yen

Banknotes of the Japanese yen. [Courtesy of Reuters-Yonhap]

South Korean retail investors are shifting focus to Japanese stocks from Greater China to capitalize on the strong market and the weakening yen.

According to an analysis conducted by Kiwoom Securities Co. on Tuesday, transactions of Japanese stocks by Korean retail investors have been surpassing those of Hong Kong by a wide margin since May.

Japanese stocks accounted for 61 percent of the entire overseas stock transactions in May, far outpacing the investments in Hong Kong (23 percent) and China (12 percent).

In June, Japanese stocks accounted for 65 percent and 58 percent in July.

The recent trend is in contrast to how Japanese stocks accounted for only 31 percent of the entire transactions in January, 29 percent in February, 46 percent in March, and 20 percent in April.

The growing attention to the Japanese stock market is attributed to the strong market.

Japan’s benchmark Nikkei 225 showed a steep upward trend from April and reached its highest point in 33 years in May.

The record low yen led by the Bank of Japan’s easing monetary policy also triggered Korean individuals to eye Japanese stocks.

The Korean won/yen exchange rate has been fluctuating around 900 won lately, even falling to the 800 won range late last month for the first time in eight years.

Investors’ interest in Hong Kong stocks, on the other hand, has cooled as concerns surrounding China’s economic recovery continue.

The geopolitical tensions between the U.S. and China also contributed to dampening investment sentiment in the mainland and Hong Kong markets.

The share of Hong Kong stock trading rebounded in April as shares of Alibaba Group Holding Ltd., which underwent organizational restructuring in late March, rallied, but the gains were short-lived.

Japanese stock investors expanded their allocation in the Global X Japan Semiconductor exchange traded fund (ETF) as Japanese semiconductor companies are expected to benefit from the U.S.-China conflict.

Companies like Sony Group Corp., ASICS Corp, and Marubeni Corp. also rose in the list of top net purchased stocks.

On the other hand, retail investors net sold Hong Kong stocks mostly for profit-taking.

According to the analysis by Kiwoom Securities, the most sold Hong Kong stock by retail investors was internet service provider Tencent Holdings Ltd.

It was followed by Chinese pure-play semiconductor foundry company Semiconductor Manufacturing International Corp. (SMIC).

In China, which includes the Shanghai A and Shenzhen A exchanges, the most sold stock by net amount was BYD Co., a leading Chinese electric vehicle company. China’s No. 1 drug maker Jiangsu Hengrui Pharmaceuticals Co. and construction machinery maker Sany Heavy Industry Co. also appeared in the list of top net sold stocks.