Surge in Chinese Asset Appeal as South Korean Capital Intensifies Allocation

In recent weeks, South Korean investors have turned their focus sharply toward Chinese markets, with data indicating that Greater China is now South Korea’s second-largest overseas investment destination. According to the Korea Securities Depository (KSD), cumulative trading in Hong Kong equities by South Korean accounts has exceeded USD 5.8 billion through August 20, trailing only U.S. markets. Concurrently, net purchases of mainland Chinese stocks by South Korean funds have reached approximately USD 499 million year-to-date, reversing a three-year net selling trend of USD 985 million and reflecting a steady restoration of investor confidence. Notably, China-themed ETFs listed in Seoul have delivered exceptional returns—some exceeding 60% in a single month—outperforming many U.S. index funds.

The investor base driving this shift spans from professionals familiar with China to a burgeoning cohort of Gen Z participants. Lee Cheol, who once worked at a Korean automotive supplier in Shandong and now engages in cross-border trade, exemplifies this trend. Constrained by the complexity of opening A-share accounts as a foreign national, he accesses Chinese securities via Hong Kong listings, yet credits last year’s visa-free pilot for ordinary Korean passport holders with boosting younger investors’ on-the-ground insights. Social media’s rapid dissemination of Chinese market developments has further galvanized Koreans’ enthusiasm for sectors such as electric vehicles and artificial intelligence.

South Korea’s retail investor community is among the world’s most active: despite a population of just over 50 million, the country counted some 69.3 million active trading accounts by the end of 2023. Historically centered on U.S. equities, these accounts have increasingly redirected capital to the Shanghai-Shenzhen-Hong Kong complex following Beijing’s series of supportive policy measures.

Institutional players have responded in kind. In May, Mirae Asset Securities launched a “China Stock Purchase Challenge,” rewarding clients holding RMB-denominated equity positions in China. Shinhan Investment Corp. waived online trading commissions for new members investing in mainland and Hong Kong shares for one year, while Eugene Investment & Securities committed to a decade-long discounted commission rate of 0.2% on Chinese stock trades. These incentives coincided with Kiwoom Securities reporting a 38.5% year-on-year revenue increase in Q1 2025 and a 15% beat on consensus profit estimates, driven largely by a jump in overseas trading fees from KRW 37.2 billion to KRW 67.4 billion.

Asset managers have also introduced China-linked products to meet demand. In July, Korea Investment Management unveiled two equity ETFs: “ACE BYD Value Chain Active,” targeting BYD and its suppliers, and “ACE China AI Big Tech TOP2+Active,” focused on leading artificial-intelligence firms. Interviews with both retail and institutional investors confirm a broad, long-term optimism toward Chinese equities, especially in new energy, AI, and consumer sectors. As markets rebound, South Koreans are reallocating toward high-growth themes such as autonomous driving and renewable energy rather than traditional industries.

This enthusiasm is grounded in dual drivers of policy support and attractive valuations. After wary sentiment tied to losses in equity-linked securities and property sector concerns from 2022 to 2024, investors began net buying in 2025, channeling capital into large-cap technology, AI, electric vehicles, and biotechnology. Analysts anticipate that clarity on stimulus measures, industrial upgrading, and domestic-demand expansion will sustain the revaluation trend in China’s on-shore and Hong Kong markets through 2026. Moreover, valuation gaps relative to U.S. and European equities, coupled with robust consumption and infrastructure cycles, underpin continued inflows despite short-term uncertainties around Sino-U.S. relations and real estate.

Hanwha Investment & Securities researcher Jung Jung-young highlights China’s advancing robotics sector, noting its imminent mass-production phase as a catalyst for both economic and market recovery. Mirae Asset analyst Park Yeon-joo underscores China’s world-class capabilities in electric and autonomous vehicles, observing that Tesla’s recent profit challenges have only heightened interest in Chinese automakers’ valuation appeal. South Korea’s accelerated embrace of Chinese assets thus reflects both structural opportunities and a growing conviction in the region’s long-term growth trajectory.