Rising Geopolitical Tensions Push Oil Higher, but Korean Investors Bet on a Pullback (Image courtesy of Yonhap)
SEOUL, Jan. 14 (Korea Bizwire) — South Korea’s retail investors are increasingly positioning themselves against rising oil prices and a surging stock market, even as geopolitical tensions and earnings momentum continue to push both higher.
Data from the Korea Exchange show that individual investors have poured money this month into inverse exchange-traded notes and funds tied to crude oil, effectively betting that prices will fall.
Through Jan. 13, retail investors bought a combined 8.6 billion won ($6.4 million) worth of inverse and double-inverse products linked to West Texas Intermediate crude futures, while sharply cutting exposure to leveraged products that profit from rising oil prices.
The strategy runs counter to recent market trends. WTI prices have climbed about 6.5 percent so far this month, driven by heightened geopolitical risks.
Tensions intensified after the Trump administration carried out a surprise military operation that led to the arrest of Venezuelan President Nicolás Maduro, followed by renewed friction over Greenland and escalating unrest in Iran.
Washington has also warned it could impose sweeping tariffs on countries trading with Tehran, fueling concerns over supply disruptions from one of the world’s major oil producers.
The KOSPI index is displayed on an electronic board at Hana Bank’s dealing room in central Seoul on Jan. 14, after the benchmark closed above the 4,700 mark for the first time in history. (Yonhap)
As a result, inverse oil funds favored by retail investors have posted losses this month, even as South Korea’s benchmark stock index has surged.
The same contrarian pattern has emerged in equities. With the KOSPI rising more than 11 percent since the start of the year and repeatedly setting intraday records, individual investors have been aggressively buying inverse and leveraged inverse exchange-traded funds that profit from a market decline.
Over the past week alone, retail investors were among the largest buyers of double-inverse products tracking KOSPI 200 futures, despite those funds posting steep losses as stocks continued to rally.
At the same time, retail investors have reduced holdings in products that directly track domestic stock indexes or amplify gains, while increasing exposure to covered-call ETFs that offer more stable income.
Market analysts say the shift reflects growing unease that the rally may pause after a sharp run-up, prompting investors to hedge or seek steadier returns rather than chase further gains.
Foreign investors, however, appear less convinced that the market’s advance is nearing an end. Recent data show overseas investors continuing to buy leveraged products tied to Korean equities, signaling expectations of further upside.
The bull statue installed in front of the Korea Exchange (Image courtesy of Yonhap)
Analysts largely agree that calls for an imminent market downturn may be premature. They note that the rally has been driven less by valuation expansion than by a clear improvement in earnings expectations, particularly in the semiconductor sector.
With forward price-to-earnings ratios remaining near historical averages and chip prices rising amid strong demand linked to artificial intelligence, many see room for additional, if more gradual, gains.
Still, strategists caution that geopolitical risks—from the Middle East to Latin America—could trigger short-term volatility, even as the broader momentum in earnings and global demand continues to support both oil prices and South Korea’s equity market.
Ashley Song (ashley@koreabizwire.com)
