Will Foreigners Turn Away... Requirements for Return

[Asia Economy Reporter Song Hwajeong] Foreign investors, who have been leading the decline in the KOSPI through continuous selling, have shown buying interest in the KOSPI for the first time in a while, drawing attention to whether the selling trend will stop. The return of foreign investors is expected to depend on variables such as energy prices.

According to the Korea Exchange on the 26th, foreign investors net purchased 60 billion KRW in the KOSPI market last week. It is the first time in four weeks that foreign investors recorded buying in the KOSPI. This month, foreign investors have sold off 2.6875 trillion KRW in the KOSPI. On the previous day as well, foreign investors net purchased 38.3 billion KRW in the KOSPI, leading the KOSPI’s shift from a downward trend to an upward one.

Notably, foreign investors bought semiconductor stocks, which they had been selling intensively. Despite the recent rebound in global stock markets, the KOSPI has struggled to rebound significantly and stabilize above the 3000-point level, mainly due to the sluggish stock prices of leading semiconductor companies. The stock most purchased by foreign investors last week was Samsung SDI. Foreign investors net purchased 199.2 billion KRW of Samsung SDI last week. Following that, they bought Kakao worth 86.5 billion KRW. Other net purchases included SK Hynix (79.1 billion KRW), Samsung Electronics (77.5 billion KRW), SK Bioscience (61.6 billion KRW), Kia (57.8 billion KRW), Hyundai Motor (53.6 billion KRW), JYP Ent. (53.5 billion KRW), SK Innovation (51.2 billion KRW), and KB Financial Group (36.2 billion KRW). This month, foreign investors have sold Samsung Electronics the most, net selling 1.9262 trillion KRW. The persistent selling trend on Samsung Electronics turned into buying last week.

Although it may not be easy for foreign investors to immediately turn to aggressive buying, the environment for their return is being prepared. Researcher Byun Junho of Heungkuk Securities said, "The aggressive selling flow of foreign investors seems to have ended since mid-last week, which was the time when the minutes of the September Federal Open Market Committee (FOMC) hinted at tapering (asset purchase reduction)." He added, "As a result, tapering at the November FOMC became a foregone conclusion, and the dollar’s strength is showing signs of peaking."

Energy price stabilization is expected to be necessary for the full-scale return of foreign investors. Researcher Byun said, "Concerns about rising energy prices continue, so although the selling flow of foreign investors has ended for now, it is still too early to say they are actively buying the KOSPI." He added, "There is a possibility of a short-term correction in the KOSPI due to rising energy prices, but considering the excessive sluggishness of the KOSPI within Asia, the possibility of price adjustment due to active selling by foreign investors is low." He further noted, "On the contrary, if expectations for energy price stabilization emerge, there is a high possibility that funds will flow into the KOSPI as part of foreign investors’ portfolio adjustments in Asian stock markets."