South Korean stocks favored by foreign investors outperformed those favored by retail traders over six months in a study covering 2020 to 2025, the Korea Capital Market Institute found.
South Korean stocks and the six-month gap
Stocks with high net purchases by retail investors exceeded the market average by 0.21 percentage points over six months. Stocks favored by foreign investors exceeded it by 1.29 percentage points.
Those figures describe the stocks’ performance relative to the market, not the total returns earned by individual investors. The institute also found that the performance gap widened over time, with foreign-favored stocks outperforming the market shortly after purchase.
Different approaches to buying
The study linked the gap to different trading patterns: retail investors tended to buy when prices fell, while foreign and institutional investors targeted stocks already rising.
In a more recent comparison, the 10 stocks most heavily purchased by retail investors fell an average of 25%, compared with an 18.8% decline for the KOSPI index. The period for that comparison was not specified.
Foreign investors sold shares in major companies including Samsung Electronics and SK Hynix while retail investors continued to buy them, illustrating the contrasting approaches.
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