Stymied at home, South Korea's mom-and-pop investors charge into China tech stocks

Seoul

SOUTH Korean retail investors are stampeding into Chinese stocks in record numbers, ploughing hundreds of millions of dollars into a tech sector rush far removed from punishing taxes and regulations on investment at home.

In July alone, South Korean investors spent US$240 million buying shares in mainland China, data from the Korea Securities Depository (KSD) showed - their largest investment in mainland markets on record.

That's a seven-fold jump from US$32.9 million in July last year, and accounts for a third of the total US$719 million net investment in China stocks for the January-July period.

While South Korean mom and pop investors have historically been big risk-takers, they have stepped up the hunt for assets overseas as the Korean government imposes stringent mortgage rules and proposals to impose capital gains tax on local stocks.

Among them is Kim, a 40-year-old Seoul chef with more than 500 million won (S$576,203) invested in Chinese stocks. Like others, Mr Kim, who declined to given his first name, is betting on Beijing's push for tech self-sufficiency to counter US trade sanctions and bans.

"It is true that interest in Chinese stocks has increased more than ever, driven by tightened regulations on domestic stocks and a boom in the China market unseen since 2015," said Mr Kim.

The United States remains a top destination for investors like Mr Kim, with Korean investments there a net US$2.27 billion in July, followed by US$475 million in Hong Kong, out of a total US$3.19 billion of overseas stock buying.

But they are also being lured by the promise of China's speedy economy recovery from the coronavirus pandemic and its rising stock market - China's tech-heavy startup board ChiNext and its STAR Market are up about 40 per cent each this year.

Overseas stocks make up about 80 per cent of Mr Kim's equity holdings, with 90 per cent of that chunk allotted to China and the rest to US equities. Mr Kim plans to park all his equity investments overseas, and is particularly bullish on the Chinese economy and mainland companies with high growth potential.

KSD data showed six of the 10 top Chinese companies that Korean investors bought between January and July were tech companies, with Shennan Circuits, a supplier to giant tech firm Huawei supplier, taking the lead with US$55.36 million net.

ZTE was also high on Korean investment list, along with Inspur Electronic Information Technology, Will Semiconductor and Luxshare Precision Industry.

The average year-to-date performance of those six shares shows a spurt of 32 per cent, compared with declines of 0.7 per cent and 23.7 per cent respectively for Korean tech heavyweights Samsung Electronics and SK Hynix.

What's more, the broader Shanghai Composite index is up 10.3 per cent, while Seoul's Kospi benchmark has gained only 3.8 per cent. REUTERS