Foreign Capital Concentrated in Semiconductors... Fourth Quarter Rebound Signal

[Asia Economy Reporter Ji Yeon-jin] Foreign investors, the 'big players' in the domestic stock market, have been continuously buying semiconductor stocks, leading to forecasts that the domestic stock market will rebound in the fourth quarter starting next month. Although the market showed weakness last month due to unprecedented foreign selling amid concerns of a semiconductor peak out, it is expected that the semiconductor sector will lead a strong market rally by the end of the year.

According to the financial investment industry on the 27th, foreign investors have recorded net purchases for seven consecutive trading days, accumulating net purchases of 1.3688 trillion KRW so far this month. This is the largest net purchase volume since November 2020. Despite the won's depreciation, with the USD/KRW exchange rate soaring from the 1150 won level to the high 1170 won level this month, the unusual buying trend by foreigners has continued.

Last month, after the global investment bank (IB) Morgan Stanley forecasted that the semiconductor supercycle would end next year due to falling memory semiconductor prices, foreign investors sold large amounts of semiconductor stocks such as Samsung Electronics and SK Hynix in the domestic market. However, since mid-month, foreigners have been focusing on accumulating semiconductor stocks. From the 13th to the 24th of this month, foreigners bought the most Samsung Electronics stocks (1.0499 trillion KRW) in the domestic market, followed by SK Hynix (169.5 billion KRW).

This foreign buying trend in semiconductors is analyzed to stem from changes in global liquidity flows. According to Hana Financial Investment, Korean ETFs listed in the U.S. saw an inflow of 57.3 million USD last month, marking the first inflow in six months since February. Lee Kyung-min, a researcher at Hana Financial Investment, analyzed, "As concerns about the semiconductor industry have somewhat eased and expectations for the year-end consumption season have been reflected, perspectives on the global IT and semiconductor sectors have changed." In fact, global semiconductor ETFs have seen inflows of 84.93 million USD for six consecutive weeks since the 20th of last month. The researcher added, "The current sufficiently low levels of the KOSPI and semiconductor sector weight indicate strong global liquidity inflows into Korean ETFs and global semiconductor ETFs. It is expected that the semiconductor sector will lead the KOSPI's strength in the fourth quarter, anticipating improved consumption of IT devices and home appliances during the year-end shopping season, which will expand semiconductor demand."