Retail investors go big on big caps, making risky bets

Investors, led by retail investors, have been piling into shares of the country's biggest companies, leading to a bull concentrated on the big caps and a bifurcation of the market.

The benchmark Kospi rose 12.88 percent from Dec. 22 through Jan. 15. From Dec. 23, the index had a seven-day rally, shooting up from around 2,700 to over 3,000.

Of the 917 listed stocks, 206 outpaced the index while 302 fell in value.

Retail investors were particularly keen on Korea's biggest companies. Of the 12.57 trillion won ($11.4 billion) they spent on Kospi stocks between Dec. 23 and Jan. 15, 11.26 trillion won went to just nine companies.

The top two investments were shares of Samsung Electronics and the company's preferred stock.

Retail investors net bought 6.05 trillion won worth of Samsung Electronics and another 1.68 trillion won worth of the chipmaker's preferred, data from Korea Exchange show. Investment into Samsung shares exceeded half of total net buying by retail investors.

No. 3 was Hyundai Mobis, followed by LG Electronics and Hyundai Motor.

The big just keep getting bigger.

As of Jan. 15, the 10 largest caps accounted for 48.86 percent of the Kospi's total market capitalization, up from 47.04 percent on Dec. 22.

"Retail investors are banking on the fact that, unlike shares of small and midsized companies, large cap shares don't usually plunge by 30 to 40 percent even when the index weakens," said Seo Sang-young, an analyst at Kiwoom Securities. "The trend also implies that retail investors are less affected by themed stocks compared to in the past, such as stocks that saw temporary jumps but have no real value."

Seo said crowding into few stock could be problematic in the long run because a lot of investors can be heavily affected by the fall of a single company, ultimately affecting soundness of the overall stock market.

"Especially if investors had borrowed to invest, that could lead to a big risk," Seo added.

Jeong Yong-taek, a researcher from IBK Securities, said investors tend to feel more secure when they invest in familiar big-name companies like Samsung Electronics and Hyundai Motor. As for now, expectations that these companies will perform better in line with growing demand for semiconductor and electric cars have helped investor sentiment, according to Jeong.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]