Did the Foreigner Sell as Much as Eight Thousand Arms?

Foreigners, KOSPI Selling Pressure Weakens

The selling pressure from foreign investors, who determine the direction of South Korea's stock market, has eased. As the intensity of foreign selling weakens, expectations for a market turnaround have increased.

According to the Korea Exchange on the 9th, the proportion of foreign ownership in KOSPI stocks relative to market capitalization rose to 31.18% as of the 4th, up from 30.90% on the 28th of last month. Foreign ownership, which stood at 33.55% at the end of last year, gradually declined to reach a low point on the 28th of last month. This is the lowest level in over 12 years since August 19, 2009, when it was 30.90%.

Since the beginning of this year, foreign investors have engaged in net buying about once every eight trading days after March, so the increase in foreign holdings raises expectations for a shift in market direction. Especially in a situation where downward pressure on the market is increasing?such as the U.S. Federal Open Market Committee (FOMC) raising the benchmark interest rate by 50 basis points this month and starting quantitative tightening next month?the reduction in foreign selling intensity can be interpreted as a positive signal for the market.

In particular, the volatility index (V-KOSPI), known as the fear index of the KOSPI, is also stabilizing. It surged to 28.95 in March but has fallen to 20.87 as of the 6th. The won-dollar exchange rate has also surpassed 1,270 won, leading to forecasts anticipating the peak of won weakness.

Lee Kyung-min, a researcher at Daishin Securities, analyzed, "Despite increased downward pressure on the domestic stock market, the intensity of foreign selling is weakening," adding, "It can be seen that foreign investors have sold as much as they intended to." He further noted, "This change in trading patterns suggests that foreign investors are proactively responding to the market flow after passing a turning point."

Although a shift in foreign investors' stance is emerging, it is still difficult to definitively declare a full market turnaround. Analysts suggest that the possibility can only be assessed after confirming whether inflation has peaked.

Han Ji-young, a researcher at Kiwoom Securities, stated, "While there is a possibility of a technical rebound due to perceptions of oversold conditions in the South Korean stock market, the market is expected to continue experiencing increased volatility influenced by cautious sentiment surrounding the aftereffects of the May FOMC and the confirmation of inflation peak in the U.S. consumer price index (to be released on the 11th of April)."