Retail money in South Korea is moving decisively toward overseas equity ETFs as the domestic stock market loses momentum. Over the past week, overseas equity ETFs drew net inflows of 1.03 trillion won, about three times the 344.6 billion won that went into domestic equity ETFs, according to ETF CHECK. The swing marks a sharp reversal from earlier in 2025, when domestic equity ETFs had gathered 4.9 trillion won on the back of a stronger local market. The change in flows came after the KOSPI, which had once threatened the 9,000 level, fell back into a sideways range around 6,000, prompting short-term capital to seek returns abroad. Investors focused heavily on U.S. benchmark-linked funds, led by KODEX US Nasdaq 100, TIGER US S&P 500 and TIGER US Nasdaq 100. The trend also highlights a mismatch between government policy and investor behavior around ISAs (tax-advantaged investment accounts). Because the current ISA framework does not allow direct purchases of stocks or ETFs listed on overseas exchanges, domestically listed overseas equity ETFs have become the main route for foreign-asset exposure while retaining tax benefits. Data from the Korea Financial Investment Association's ISA Damoa platform shows those products made up about 23% of total ISA assets at the end of June, slightly ahead of domestic stocks at roughly 22%. Seoul is still pressing ahead with a Productive ISA designed to channel more savings into domestic stocks, domestic equity ETFs and national growth funds by improving tax treatment for those assets while reducing benefits for domestically listed overseas equity ETFs. But analysts at Shinhan Securities and Samsung Securities said tax adjustments alone are unlikely to overcome weak domestic market appeal, especially while U.S. stocks remain strong and continue setting all-time highs in August.