Even the Chairman Joined Sales... Why Did Foreigners Sell Off 1.3 Trillion Won in the 4 Major Banks? [Why&Next]

Foreign Investors Net Sell 1.3 Trillion KRW in Four Major Financial Groups Over Past Three Months
Large-Scale Selling Began as Domestic Instability Rose After Martial Law Incident
Continued Political Uncertainty May Lead to Further Market Adjustments

Foreign investors have been net sellers of more than 1.3 trillion KRW worth of shares in the four major domestic financial holding companies since the end of last year. It is assessed that a combination of domestic political and foreign exchange market instability and profit-taking has driven the continued selling. Although the financial holding company chairmen attended investor relations (IR) meetings to actively explain their efforts to enhance corporate value, it is expected that it will take time for the foreign investors who have left to return.

Foreign Investors Net Sell 1.327 Trillion KRW in Four Major Financial Groups Over Three Months

According to the financial investment industry on the 26th, foreign investors have net sold about 1.327 trillion KRW worth of shares in the four major financial holding companies over approximately three months from December last year to the 24th of this month. The financial holding company most heavily sold by foreign investors was KB Financial Group, with net sales of about 770 billion KRW from early December last year to the 24th of this month. As selling continued, the foreign ownership ratio, which was 78.04% on December 2, dropped by 2.49 percentage points to 75.62% on the 24th.

During the same period, foreign investors also net sold about 412.3 billion KRW worth of Shinhan Financial Group shares. The ownership ratio fell by 2.06 percentage points from 60.98% to 59.06%. Hana Financial Group also sold about 188.2 billion KRW worth of shares, with its ownership ratio declining from 68.17% to 67.11%. Woori Financial Group was the only one to see net purchases of about 47.8 billion KRW. However, its foreign ownership ratio remains relatively low at 45.92% compared to other financial groups.

The massive selling of financial holding company shares by foreign investors over a few months is interpreted as a result of overlapping factors such as domestic political and exchange rate instability following the martial law incident and profit-taking. Following the government's value-up policy, banks actively increased dividends, repurchased, and retired treasury shares from early last year, leading foreign investors to continue net buying financial holding companies, reaching record-high ownership ratios in November last year. However, after the martial law incident occurred in early December, domestic political instability and a sharp rise in the won-dollar exchange rate prompted foreign investors to start massive selling of financial holding companies, resulting in a decline in foreign ownership ratios. Eun Kyung-wan, a researcher at Shinhan Investment Corp., analyzed, "Since December 3, when political uncertainty emerged, bank stocks have underperformed the overall KOSPI index," adding, "The rapidly rising exchange rate in a short period was a major cause of foreign investor outflows."

In particular, in the case of KB Financial Group, it is analyzed that net foreign selling increased further after the company announced a shareholder return policy below market expectations in its earnings report earlier this month. Concerns that the common equity tier 1 (CET1) ratio, which serves as the basis for shareholder returns, declined, possibly leading to smaller-than-expected treasury stock repurchases and retirements, accelerated foreign investor outflows. Jeong Tae-jun, a researcher at Mirae Asset Securities, pointed out, "KB Financial Group failed to defend its capital ratio compared to other holding companies and announced a shareholder return policy below market expectations," adding, "This is a concern not only because of short-term supply and demand weakening but also because it reduces the future capacity for shareholder returns."

Shinhan Financial Group's controlling shareholder net profit for the fourth quarter was 473.4 billion KRW, falling 29.4% short of market consensus, expanding market concerns. The rise in exchange rates widened the deficit in non-interest income, and conservative provisions were reflected in asset trusts, capital, and securities sectors.

On February 13, 2025, Lee Bok-hyun, Governor of the Financial Supervisory Service, along with financial holding company chairpersons, held a business agreement ceremony at the Korea Institute of Finance in Samcheong-dong, Seoul, to foster and strengthen the capabilities of outside directors among the Financial Supervisory Service, Korea Institute of Finance, Korea Federation of Banks, and financial holding companies. (From left) Ko Seok-heon, Head of Shinhan Financial Group Division; Ham Young-joo, Chairman of Hana Financial Group; Yang Jong-hee, Chairman of KB Financial Group; Cho Yong-byeong, Chairman of the Korea Federation of Banks; Governor Lee; Lim Jong-ryong, Chairman of Woori Financial Group; Lee Chan-woo, Chairman of NH Nonghyup Financial Group; Lee Jun-su, President of the Korea Institute of Finance. Photo by Jo Yong-jun

Continued Political Instability May Lead to Prolonged Selling

As foreign investor outflows continued, even financial holding company chairmen attended IR events to reiterate their commitment to value-up efforts. According to the financial sector, major financial holding company chairmen such as Yang Jong-hee of KB Financial Group, Ham Young-joo of Hana Financial Group, and Lim Jong-ryong of Woori Financial Group personally attended the Korea Conference hosted by JP Morgan in Seoul on the 21st to introduce their value-up policies to foreign investors. It is considered quite unusual for financial holding company chairmen to attend investment events in person. They also attended the 'MOU Ceremony for Training and Strengthening the Competence of Outside Directors' held at the Financial Training Institute in Jongno-gu, Seoul, on the 13th, where they pledged to actively continue value-up policies this year.

Despite the CEOs' appeals, it is expected to take more time for foreign investors to return due to domestic political issues and expanding regulatory concerns. Despite the active appeals from the holding company chairmen, KB Financial Group saw foreign investors net selling shares for 12 consecutive trading days from the 10th to the 25th, and other financial holding companies are in similar situations. A banking industry official said, "Political and government pressure on banks' interest income is intensifying, political instability persists, and profit-taking by foreign investors is also occurring, so it does not seem easy for foreign investors to turn to net buying in the short term."