Beyond 'Yukcheonpi' to 'Chilcheonpi'?... The Next Variable Driving Foreign 'Buying' Arrives in March-April [Weekend Money]

Won Appreciation Expected After March
Likely to Serve as Additional Driver for Stock Market Rally

The KOSPI continues its steep upward trajectory, rising as high as the 6,300 mark. While policy measures and the semiconductor sector previously propelled the index to the “six-thousand-pi” level, the next major variable expected to drive the bull market is the exchange rate.

Yonhap News Agency

On February 26, the weekly closing price (as of 3:30 p.m.) of the Korean won against the U.S. dollar in the Seoul foreign exchange market finished at 1,425.8 won, down 3.6 won from the previous trading day, marking the lowest level in about a month. During intraday trading, the rate even dropped to the 1,410-won range.

Byun Junho, a researcher at IBK Securities, analyzed, “Since the second quarter of last year, expectations for government policy and the semiconductor boom have driven the bullish environment, and their influence continues now through the third amendment to the Commercial Act and upward revisions in semiconductor earnings. Notably, during the roughly nine months of this market surge, there has not been an unusual strengthening of the won. This points to the likelihood of a delayed appreciation of the won, which in turn suggests the possibility of additional inflows of domestic and foreign capital into the stock market.”

Byun cited the following factors as reasons for heightened expectations of a stronger won in March and April: continued anticipation of a narrower Korea-U.S. interest rate gap; expectations for Korea’s inclusion in the World Bond Government Index (WBGI) in April; the impact of a U.S. court ruling that reciprocal tariffs are illegal; and expectations surrounding the launch of the Returnee Investment Account (RIA) in the domestic market. He explained, “The WBGI issue is expected to attract a large-scale inflow of overseas capital, estimated at around 80 trillion won, which is likely to become a factor pushing the exchange rate lower. In addition, the U.S. court’s ruling on reciprocal tariffs will weaken tariff momentum, putting downward pressure on the dollar, while the launch of the RIA is expected to partly redirect U.S. investment funds into the Korean stock market, which will stimulate upward pressure on the won.”

Since the beginning of the year, the supply and demand dynamics in the domestic stock market have shown net buying by financial investment institutions and net selling by foreign investors. Among institutions, only banks have shown a slight net buying trend, with most others recording slight net selling. Byun explained, “Financial investment institutions have provided upward momentum by making large net purchases totaling about 19 trillion won since the start of the year. In particular, except for February 2 and 5, they have recorded daily net buying throughout February, maintaining a persistent buying stance. Of the 19 trillion won, approximately 15 trillion won represents net purchases since February.”

It is estimated that a significant portion of these financial investment purchases consists of individual investors’ buying of exchange-traded funds (ETFs). Byun analyzed, “The inflow of individual ETF funds since February is likely due to two main factors. First, the KOSPI surpassed the 5,000 mark in February, as promised by the government, which appears to have greatly increased trust in government policy. Second, after confirming the KOSPI’s strength in early January, investors’ confidence in this year’s bull market seems to have grown. This is because the market’s trend in January often serves as a signpost for the rest of the year.”

Byun stated that in March and April, if the won-dollar exchange rate drops more than expected and confidence in a stronger won increases, buying pressure from financial investment institutions will likely outweigh selling pressure from foreign investors. “A short-term appreciation of the won can slow down or even reverse the recent selling trend among foreign investors,” he said. “As U.S. stock market funds flow into Korea through the RIA, individual ETF buying will further intensify, sustaining the buying momentum. This suggests that, following policy measures and the semiconductor sector, the exchange rate is further reinforcing favorable market conditions and could act as a new factor driving the market upward,” he added.

This content was produced with the assistance of AI translation services.