South Korea: Retail support and FX divergence – BNY

BNY’s Geoff Yu highlights that South Korean equities have delivered exceptional returns in 2026 while institutional investors remain net sellers, particularly from the Americas. KRW FX volumes are elevated, but the won has weakened against the Dollar, pointing to hedging and profit-taking rather than fresh inflows. Retail investors are the key marginal buyers, raising concentration and regulatory risk.

Equity gains versus weak KRW

"Cross-asset volumes back that up. In South Korea, KRW activity picked up sharply as the rally extended, but FX never confirmed the equity move. Despite the KOSPI rising more than 110% year to date, the won weakened by about 6% against the U.S. dollar."

"South Korean equities saw $17.25bn of net institutional outflows year to date through June 2026. The Americas drove the move, accounting for $15.65bn of net selling, or nearly all of the global total. U.S. institutions were the biggest sellers by far, responsible for 72% of all South Korean equity sales globally year to date."

"Retail is the marginal buyer. Retail investors have become the key marginal buyers in South Korea. Free from ownership caps and benchmark constraints, they kept adding to AI and semiconductor names even as institutions sold."

"Cross-asset activity makes the South Korea story clear. In forwards and swaps, cross-border KRW FX volumes averaged 1.23x normal year to date, with nine surge days above the 2.05x threshold – almost 8% of all trading sessions. June posted the highest KRW activity of the year at 1.90x normal volume, even though the KOSPI returned just 3.6% for the month."

"Watch the marginal buyer. There are signs South Korea’s retail flow impulse may be fading. The June 23 correction, with the KOSPI down 10% on the day, along with wider weakness in global tech, is likely to increase scrutiny of leveraged retail participation."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)