Return-to-Domestic-Market Accounts (RIAs) Reach 242,856 on May 19 With 100% Capital Gains Deduction Ending in May
비지니스코리아 Jung Suk-yee (pr@businesskorea.co.kr)
1.2 trillion won flows back into Korean stock market over two months as retail investors sell U.S. big techs and load up on Samsung Electronics and SK Hynix
Over the past two months, 1.2 trillion won ($800 million) has flowed in through the "Return to Domestic Market Account" (RIA), and it was found that ‘Seohak Ants’ (domestic retail investors investing in foreign stocks) sold US big tech stocks such as Nvidia and Tesla, moving their funds into domestic semiconductor leading stocks like Samsung Electronics and SK Hynix, as well as index-based Exchange Traded Funds (ETFs) through RIA accounts.
The Korea Financial Investment Association announced on May 21 that the Return to Domestic Market Account (RIA), which was launched in March, recorded a total cumulative 242,856 accounts and the total balance reached 1.9443 trillion won by May 19.
Both the number of accounts and the balance have shown a steady upward trend in correlation with the KOSPI index since the initial launch.
As Seohak Ants sold foreign stocks such as Tesla and Nvidia in the RIA, the funds flowed into domestic stocks and equity funds. This is evaluated as contributing to the inflow of foreign currency and the expansion of demand in the domestic stock market.
By age group, it was revealed that those in their 40s and 50s are utilizing the RIA most actively. People in their 50s (32%) and 40s (27%) accounted for 59% of the total balance, followed by those in their 30s (21%) and those 60 and older (12%).
Overall, the proportion of subscribers in their 30s and younger (31%) is also not small, which is analyzed to indicate that the RIA tax benefits have acted as a practical incentive to attract young people into the domestic capital market.
In addition, a trend was confirmed where overseas big tech investment funds are flowing into domestic semiconductor and artificial intelligence (AI) related stocks, as well as ETFs that diversify investments in domestic assets.
Seohak Ants mainly generated profits by selling big tech stocks such as Nvidia and Tesla, and leverage ETFs highly preferred by domestic investors (Direxion Semiconductor 3x, Nasdaq-100 3x). In the domestic market, they purchased shares of representative domestic semiconductor companies such as Samsung Electronics and SK Hynix, and KOSPI 200 index tracking ETFs.
Among foreign stocks, the number one sold stock was Nvidia at 180.1 billion won. This was followed by Direxion Semiconductor 3x ETF at 94.7 billion won, Tesla at 50.4 billion won, Alphabet A at 45.1 billion won, Apple at 36.5 billion won, and Palantir at 28.2 billion won.
Among domestic stocks, the number one purchase was Samsung Electronics at 78 billion won. SK Hynix at 66.7 billion won, Hyundai Motor at 14.6 billion won, and KODEX 200 ETF at 13.4 billion won followed.
The Korea Financial Investment Association stated that the capital gains deduction rate for foreign stock sales is 100% by the end of May, and will be gradually reduced to 80% from June to the end of July, and 50% from August to the end of the year.
Trading profits from foreign stocks and ETFs are taxed at a capital gains tax rate of 22%, which is disadvantageous in terms of taxation compared to domestic listed stocks and equity ETFs, where trading profits are tax-exempt.
Investors interested in tax savings need to actively consider utilizing the 100% capital gains deduction benefit applied by the end of May by opening an RIA.
However, caution is advised as the settlement of foreign stock sales must be completed by the end of May for the 100% capital gains deduction to be applied to the capital gains.
Han Jae-young, a head of division at the Korea Financial Investment Association, said, “The Return to Domestic Market Account is highly significant in that it provided an opportunity for liquidity that had remained in overseas markets to flow into the domestic capital market.” He added, “Going forward, we will launch various domestic investment products with high investment appeal together with the industry, and support the Return to Domestic Market Account so that it can function as a channel contributing to exchange rate stability and productive finance.”
Jung Suk-yee
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