Foreigners Lead Kospi to Highest Level in 2 Years and 5 Months

Foreign Investors' Solo Net Purchase of KOSPI This Month... 3.9 Trillion KRW
Net Purchase Since the Beginning of the Year Exceeds 21 Trillion KRW
Focused Buying of Samsung Electronics and SK Hynix
Foreign Investors Still Have Additional Buying Capacity

The KOSPI has risen to the 2790 level for the first time in 2 years and 5 months. The main driver behind the KOSPI reclaiming the 2790 level was foreigners. Foreign investors have been the sole net buyers this month, leading the KOSPI's rise.

According to the Korea Exchange on the 20th, the KOSPI closed at 2797.33 points, up 1.21% from the previous day. This is the highest closing level since January 21, 2022 (2834.29), marking a 2 year and 5 month high.

After showing sluggish movement since April, the KOSPI appears to have started an upward trend again this month. The KOSPI has risen more than 6% this month. Compared to the relatively weak performance against major global stock markets, the KOSPI has shown a different face this month, advancing to the 2790 level.

The rise in the KOSPI was driven by foreign investors. Foreigners have net purchased 3.9436 trillion won in the KOSPI market this month. In contrast, individuals and institutions net sold 2.4498 trillion won and 1.2462 trillion won respectively during the same period. Foreign investors have actively pursued a 'Buy Korea' strategy, having purchased over 21 trillion won since the beginning of the year.

Labor Gil, a researcher at Shinhan Investment Corp., said, "Since last year, the correlation coefficient between foreign net buying and the KOSPI directionality has been 83%, making them the key supply-demand players determining index performance." He added, "Foreign net buying of the KOSPI has exceeded 27 trillion won since the November FOMC last year, when disinflation expectations began in earnest. Although the domestic stock market has experienced fluctuations, it ultimately shows a pattern of moving in tandem with foreign net buying."

Foreign buying was concentrated in semiconductors. This month, foreigners net purchased Samsung Electronics worth 2.0816 trillion won, the largest amount, followed by SK Hynix with 1.3695 trillion won net purchases. The combined net buying of these two stocks accounted for 87% of the total foreign net purchases in the KOSPI market.

For further KOSPI gains, the movement of foreign investors, the major supply-demand players, is crucial, so market attention is focused on whether foreign buying momentum will continue. Researcher Noh said, "Currently, foreign ownership based on market capitalization is 34.0% for KOSPI and 9.4% for KOSDAQ, levels that have just recovered to the average since 2010." He added, "During the pandemic, foreign ownership in the KOSPI rose to 36.8%, and considering the KOSPI market capitalization, a 1 percentage point increase in ownership corresponds to net purchases of around 20 trillion won." He continued, "Considering the patterns of the most important U.S. and U.K. funds in foreign supply-demand in the domestic stock market, there is still room for additional capital inflows."

However, there are opinions that risk management is necessary due to the concentration in semiconductors. Kang Daeseok, a researcher at Yuanta Securities, said, "In the U.S., which is continuing its record-high rally, concentration around big tech has intensified, and domestic semiconductor stocks have also reflected the global semiconductor strength quite a bit." He pointed out, "As of the 18th, during the approximately 4.1% rise in the KOSPI since the beginning of the year, SK Hynix's contribution was calculated to be 3.3 percentage points." He added, "This means that if overheating concerns or price burden adjustments occur in the U.S. stock market, domestic stocks will inevitably be affected as well, so the need for risk management is expected to gradually emerge."