[Weekly Market Review] Return of Foreigners? Nearly 2 Trillion Net Buying Pushes KOSPI to New Highs

KOSPI Rises to Just Below 2230
In the 4th Week of July, Foreigners Net Buy 1.9 Trillion Won in KOSPI Market

[Asia Economy Reporter Oh Ju-yeon] From July 27 to 31, the last week of July, the KOSPI rose by 2.08%. On the 31st, it even reached a new intraday high. This is interpreted as foreign investors' buying spree, centered on semiconductors, driving the index upward.

According to the Korea Exchange on the 1st, from July 27 to 31 in the KOSPI market, individual investors sold stocks worth 823.4 billion KRW, institutional investors sold 1.0395 trillion KRW, while foreign investors scooped up 1.945 trillion KRW. The stock most purchased by foreigners was Samsung Electronics, with purchases totaling 1.6176 trillion KRW.

Labor Gil, a researcher at NH Investment & Securities, explained, "The reasons for foreign buying include expectations for the expansion of the foundry market and easing of passive fund outflows tracking emerging markets." Researcher Roh added, "Considering the scale of non-arbitrage program trading, the nature of foreign buying is not judged to be passive inflows," and forecasted, "If passive funds flow in later, foreign net buying of spot stocks could continue further."

[Image source=Yonhap News]

Fueled by foreign buying, the KOSPI broke intraday record highs day after day in the last week of July. On the 31st, the intraday high reached 2281.41, surpassing the pre-COVID-19 intraday record of 2277.23. Although intraday, crossing the 2280 level is the first time since the crash in October 2018.

The KOSDAQ index is also soaring, continuously setting new intraday highs. On the 31st, the KOSDAQ index rose 0.14% from the previous trading day to 815.30, approaching the level just before the crash caused by the US-China conflict in 2018, which was 816.53 (closing price on October 1).

The remarkable rebound of the KOSDAQ index is attributed to abundant liquidity in the market flowing into KOSDAQ’s bio and untact (non-face-to-face) related stocks, creating relative strength. In particular, the advances of growth stocks in pharmaceuticals & bio, information technology (IT), gaming, and media had a significant impact.

Since the beginning of the year in the KOSDAQ market, the pharmaceutical sector rose 48.7%, and software (29.2%) and IT software & services (27.9%) also recorded high growth rates. Securities firms see that in the era of low growth and low interest rates, the COVID-19 pandemic has created an environment where future industries can grow further, so interest in KOSDAQ growth stocks is inevitably increasing.

Another point to note is the ongoing surprise earnings announcements from companies in the second quarter.

Lee Eun-taek, a researcher at KB Securities, analyzed, "Second-quarter earnings are showing an unprecedented surprise streak, which is a common phenomenon not only in the Korean stock market but also in the US." He added, "About 50% of market capitalization has reported earnings, but less than 10% of individual stocks have announced results. As mid- and small-cap stocks begin to report earnings, attention is needed."