Retail investors switch interest to small stocks

The number of trading transactions by retail investors has shot up this year in the benchmark Kospi market, as investment preference switched to small to mid-cap stocks instead of large-cap shares.

According to the Korea Exchange on Monday, daily stock orders from retail investors rose by 57.82 percent year on year to an average 2.85 million transactions this year by early this month.

The proportion of retail investors in the Kospi market’s transactions also rose this year, making individual investors account for more than half - 53.43 percent of total stock orders - compared to 51.8 percent last year.

At the same time, the number of transactions in which each individual investor traded 10,000 shares daily also increased by 13.23 percent year on year to 23,338 transactions, showing that individual investors mostly bought in and sold off low-end stocks.

Analysts say this is a sign local investors have shifted their money from large-cap shares to small to mid-cap stocks this year to focus on each company’s growth potential and attempt to profit from stock price fluctuations of theme-based stocks.

“Because large-cap conglomerates didn’t perform that well in the first half of this year, retail investors tended to quickly buy smaller, issue-sensitive stocks and sell them off quickly as soon as the price rose,” said Han Yo-sub, an analyst from KDB Daewoo Securities. “Another factor is that the smaller shares showed better-than-expected quarterly performances, which made retail investors change their mind to focus on growth potentials [instead of the sheer size of each company].”

Meanwhile, transactions of deep-pocket individual investors shrunk this year. The number of large orders, where each person makes transactions worth more than 100 million won ($87,500) daily, decreased by 5.16 percent year on year for 10,106 transactions a day.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]