[MarketING] Foreigners Who Went to KOSDAQ

Foreigners Net Sell on KOSPI for Two Consecutive Days
Focused Net Buying of Secondary Battery Stocks on KOSDAQ

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] The stock market rebounded after a day. Ahead of the scheduled speech by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), the KOSPI's gains were limited due to cautious trading, but the KOSDAQ surged significantly, surpassing the 770 mark, as foreign investors concentrated their buying on secondary battery material stocks.

Foreign Investors Sell KOSPI but Buy KOSDAQ

On the 7th, the KOSPI closed at 2,451.71, up 13.52 points (0.55%) from the previous day. The KOSDAQ ended the session at 772.79, rising 11.46 points (1.51%).

The difference in gains between KOSPI and KOSDAQ was driven by foreign investor trading. Foreign investors net sold 63.2 billion KRW in the KOSPI market, marking two consecutive days of selling. Conversely, they purchased 274.4 billion KRW in the KOSDAQ market. Particularly, buying was concentrated in secondary battery-related stocks. Foreign investors bought EcoPro the most, with net purchases of 90.1 billion KRW. Alongside this, they net bought EcoPro BM for 31.3 billion KRW and L&F for 11 billion KRW, driving the rise in the KOSDAQ index. EcoPro surged 13.47% that day, EcoPro BM rose 2.61%, and L&F increased by 2.79%.

Kim Seokhwan, a researcher at Mirae Asset Securities, explained, "Foreign investors focused their purchases on the secondary battery sector," adding, "The sector rose together due to expectations of increased sales in China following Tesla's January price cuts and benefits from the U.S. Inflation Reduction Act (IRA)."

Positive forecasts for this year's earnings growth also appear to have influenced the market. Jang Jeonghoon, a researcher at Samsung Securities, projected, "EcoPro's operating profit this year will exceed 1 trillion KRW," and added, "Its subsidiary EcoPro BM has started full operation of new production capacity due to increased demand for high-nickel cathode materials from clients, and through a 10% production increase at existing fabs, EcoPro BM alone is expected to record sales of 8.9 trillion KRW, a 67.9% growth compared to the previous year."

How Long Will the Dollar Strength That Stimulates Foreign Investors' Profit-Taking Last?

Following the release of U.S. January employment data, the continued strength of the dollar and rising interest rates have stimulated foreign investors' desire to realize profits. This marks the first time this year that foreign investors have sold for two consecutive days in the KOSPI market. Researcher Kim said, "Foreign investors are managing risk by taking some profits as the Fed's hawkish tightening stance continues, causing the dollar and government bond yields to rise."

In the Seoul foreign exchange market that day, the won-dollar exchange rate closed at 1,255.3 won, up 2.5 won from the previous session. Early in the session, it approached the 1,260 level. It surged 23.4 won in a single day, quickly rising into the 1,250 won range.

Kim Hyojin, a researcher at KB Securities, explained, "The won-dollar exchange rate, which had been below 1,230 won, approached 1,260 won due to strong U.S. employment, dollar strength, and South Korea's record trade deficit," adding, "In the short term, strong U.S. employment and retreating expectations for rate cuts will widen the interest rate gap between the U.S. and Europe, leading to dollar strength, but the magnitude will not be large."

The outlook is that the dollar strength may continue for a short period. Researcher Kim said, "The won-dollar exchange rate will rise further but not by a large margin," and added, "Considering global inflation slowdown, the tightening by major central banks nearing completion, and expected economic recovery in the second half, the first-quarter average is forecasted at 1,255 won."

Park Sanghyun, a researcher at Hi Investment & Securities, analyzed, "The U.S. employment surprise triggered dollar strength, and uncertainty surrounding the Bank of Japan's monetary policy is also adding momentum to the dollar's strength," noting, "With the term of Bank of Japan Governor Kuroda Haruhiko expiring in early April, current Deputy Governor Amamiya Masayoshi is being mentioned as a successor, increasing pressure on the yen to weaken." He also predicted that the yuan's strength trend will likely ease due to the expansion of U.S.-China conflicts triggered by reconnaissance balloon incidents. Park added, "Ultimately, the dollar strength trend will continue in the short term," but cautioned, "However, given many factors for dollar weakness in the first half, such as the Fed's potential pause in rate hikes, the dollar strength phenomenon will likely remain a short-term trend."