With gold, semiconductors, and even the KOSDAQ index all strengthening at the same time, the sentiment of retail investors is heating up. As retail investors have flocked in, the KOSDAQ has extended gains for six consecutive sessions, and the official domestic gold price has soared more than 7%, surpassing 1 million won per don for the first time. However, some note that because a ‘FOMO (fear of missing out)’ psychology underlies the recent strength in the KOSDAQ and gold prices, the direction could change at any time.

That day, the KOSDAQ closed at 1164.41, up 30.98 points (2.73%) from the previous session, extending the rally. In the four trading days this week, when the KOSDAQ topped 1,000 points for the first time in four years, it has surged 17.15%. The KOSDAQ 150 index, which groups large caps on the KOSDAQ, jumped 26.48% over the period.

In the Korea Exchange (KRX) gold market, the only official domestic gold trading venue, domestic gold closed at 269,810 won, up 18,170 won (7.22%) from the previous session, extending its record-high rally. The price of 1 don (3.75 g) of gold was 1,011,788 won, marking the first time the official domestic gold price has exceeded 1 million won per don.

At the root of the recent strength in precious metals, including gold and silver, and in the domestic stock market are ‘individual investors’. Over the past four sessions on the KOSDAQ, institutions were ‘buy’ to the tune of 8.619 trillion won, while individuals were ‘sell’ totaling 9.143 trillion won.

On the surface, individuals appear to be shunning the KOSDAQ, but they are significantly increasing investment in KOSDAQ exchange-traded funds (ETF), pushing the KOSDAQ higher. Net purchases of KOSDAQ ETFs by individuals are reflected in the net purchases attributed to institutions.

During the period, individuals bought 2.259 trillion won worth of ‘KODEX KOSDAQ150’, a representative KOSDAQ ETF. ‘KODEX KOSDAQ150 Leverage’, which bets two times on gains in the KOSDAQ 150, saw net purchases of 1.247 trillion won. Including other KOSDAQ ETFs, net purchases of KOSDAQ-related ETFs by retail investors exceed 5 trillion won over the four sessions.

Seo Sang-young, a researcher at Mirae Asset Securities, said, “The KOSDAQ market itself is moving on supply-demand dynamics to an excessive degree,” and added, “When individual investors are net buyers of ETFs, liquidity providers (LP) that make the market buy mainly large caps; as the index rises, investors pour in. That is the structure.”

Gold and silver are similar. Recently, gold and silver have been strong as ‘big-money’ individual investors from China and elsewhere have come in via ETFs. As prices surged, individual investors also boarded the precious-metals rally, stirring the domestic market. The ‘gold kimchi premium (the phenomenon where the domestic price is higher than the international price)’, which had been around 1% in the middle of this month, is above 5% as of today. More than 1 trillion won is flowing into gold and silver ETFs, with individual net purchases this month of the representative silver ETF ‘KODEX Silver Futures (H)’ reaching 687 billion won.

In addition to the KOSDAQ and precious metals, funds from retail investors are flowing into the KOSPI as well, centered on semiconductors, with individuals recording more than 2 trillion won in combined net purchases of Samsung Electronics (1.476 trillion won) and SK hynix (663 billion won) that day. The KOSPI closed at 5221.25, up 50.44 points (0.98%), aided by SK hynix (2.38%) and Hyundai Motor (7.21%).

Although the market is strong amid a ‘liquidity-driven rally’, with investor deposits at 100 trillion won and daily turnover on the domestic market topping 50 trillion won for the first time, some caution that care is needed in investing given the rapid surge in the index.

Seo said, “One cannot say a market that rises on the power of supply-demand flows regardless of fundamentals is bad, but one cannot say it is good either,” adding, “It can fall as quickly as it has risen.”