Retail investors losing money as can't-lose strategy fails

Donghak Ants, the retail investors who rushed to stocks starting last year in a frenzy of buying, have been getting crushed lately.

“I poured in 100 million won [$90,010] into Samsung Electronics and SK hynix shares early this year, and I’m now sitting on 11 percent losses,” said an employee at an IT firm in Seoul.

According to recent data from the Korea Exchange, retail investors lost on average 2 percent between Jan 4 and June 7 on their top-10 stocks. During the same period, foreigners gained 31.7 percent on their top-10 choices and intuitions 2.2 percent.

Retail investors have been gravitating toward the old standards, and have been paying for their lack of skepticism, with eight of their top-10 picks underwater.

They lost on average 2.2 percent on their bets on Samsung Electronics. In total, retail investors bought 22-trillion won of Korea’s largest company during that period, at an average buy-in price of 83,696 won. The shares traded at 81,900 on June 7.

Individuals who purchased Hyundai Mobis lost on average 7.6 percent, and they lost on average 6.3 percent on Samsung SDI. Individual investors in SK hynix were down just 0.1 percent.

Foreigners only lost on three of their top 10, LG Chem, NCSoft and SK Biopharmaceuticals, while institutions are down on five of their picks: LG Display, Hotel Shilla, OCI, Korea Zinc and Kia.

The three groups focused on different categories.

Retail investors poured their money into several IT large caps – Samsung Electronics, SK hynix and LG Chem – and auto companies such as Hyundai Motors and Hyundai Mobis. Rechargeable battery maker Samsung SDI was another company retail investors flocked toward.

“Prices of IT shares were down largely due to the rising inflation concerns,” said Jeong Yong-taek, of IBK Investment & Securities.

Foreign investors concentrated on cyclical stocks, such as LG Chem, Posco, Shinhan Financial Group, KB Financial Group, Hana Financial Group and Samsung Fire & Marine Insurance. Cyclical stocks refer to those that move up during economic recovery and fall during recession. Shares of Hana Financial Group and Shinhan Financial Group rose as interest rates increased.

Prices of growth stocks used to be on a rise, but prices of cyclical stocks started to rise starting early this year. Foreigners were fast to catch the trend.

Retail investors tended to put too many eggs in one basket.

Of the 49.8 trillion won-worth Kospi stocks they purchased, 44 percent went to Samsung Electronics shares. Most of them were beginners to the stock investment.

The company has been trading around the 80,000-won mark and hasn’t been above 90,000 won since Jan. 12.

“There aren’t that many gainers because a lot of money from retail investors is focused on Samsung Electronics shares,” said Pyeon Deuk-hyeon of NH Investment & Securities.

Poorly thought-out strategies contributed to their losses.

“Foreign investors have easier access to information, and they’re also good at analyzing the given information to make good investment decisions,” said Hwang Sei-woon, a senior research fellow at Korea Capital Market Institute. “Retail investors tend to follow their instincts or gut feelings.”

Some brokers remain optimistic.

“Unlike the past, they bought a lot of blue chip stocks,” Chung Myoung-ji, a senior analyst at Samsung Securities, said of retail investors. “They also tend to buy more when share prices fall, which could be considered positive in the long-term."

"If IT and auto stocks go up in June, retail investors will see different results.”

BY HWANG EUI-YOUNG [lee.taehee2@joongang.co.kr]