Stronger South Korean won drives Korean investors to increase US stock purchases, with growing diversification into short-term bonds and quantum computing

A stronger South Korean won is encouraging local investors to step up their purchases of US stocks again, as a stronger currency makes dollar assets cheaper in won terms.

According to the Korea Securities Depository, the outstanding value of US stocks held by residents in Korea stood at $191.84 billion as of Wednesday.

The figure rose from $171.46 billion at the end of July and $188.36 billion at the end of August, continuing its upward trend into September.

While Korean investors' purchases of US stocks had previously been concentrated in semiconductor-related products, recent data shows their buying has become more diversified.

The most heavily purchased overseas-listed security so far this month was the iShares 0-3 Month Treasury Bond exchange-traded fund, or SGOV, which invests in US Treasury securities with maturities of three months or less. Net purchases of the ETF totaled $129.82 million.

Demand for short-term bonds typically increases when market uncertainty rises or investors expect interest rates to remain high or move higher, as the securities offer relatively low interest-rate risk while providing income.

Considering SGOV ranked 18th among the most heavily purchased US securities by Korean investors, with net purchases of $71.08 million during the seven trading days from Aug. 3 to Aug. 11, Korean investors' appetite for SGOV has strengthened sharply over the past month.

The shift marks a change from the buying pattern seen early last month. In early August, local investors' purchases of US equities were concentrated in tech stocks, with Amazon ranking first at $184.03 million in net purchases, followed by SpaceX at $132.37 million and Sandisk at $112.35 million.

This month, alongside SGOV, quantum computing company IonQ attracted $93.86 million in net purchases, while Google parent company Alphabet ranked among the most heavily purchased US securities with $129.82 million in net buying.

A stronger won has lowered the cost of converting local currency into dollars, while a pullback in US stocks has created opportunities for bargain hunting. The combination appears to have encouraged Korean investors to return to the US market while also diversifying their purchases beyond high-growth technology stocks.

While the Korean won has recently strengthened to the range of 1,330 to the dollar for the first time since October 2024, renewed buying of US stocks by local investors could create fresh downward pressure on the won.

The won was quoted at 1,346.48 per dollar as of noon Friday, returning to the 1,340 range as global oil prices and US Treasury yields surged.

"The won's appreciation could be limited as foreign investors could resume selling Korean stocks and Korean retail investors could return to buying US stocks," said Min Kyung-won, an economist at Woori Bank.