Foreign investors buck ‘Sell in May’ adage, net buying Kospi stocks

[Photo by MK DB]

Foreign investors have been net buyers of stocks worth over 1.4 trillion won ($1.05 billion) in South Korea’s main bourse Kospi market since May, while dumping stocks on in the secondary Kosdaq market, following the stock market adage “Sell in May.”

According to HI Investment & Securities Co. on Friday, foreign investors net purchased a total of 1.41 trillion won worth of stocks in the Kospi market between May 1 and May 18. This stands in stark contrast to their net selling of nearly 500 billion won in the same period in the Kosdaq market.

Foreign investors have been increasing their buying volume since last month when the benchmark Kospi index showed a sideways trend. The monthly net buying volume by foreign investors in the main bourse was 6.4 trillion won in February, 425.3 billion won in March, 288.2 billion won in April, and 1.41 trillion won in May (as of May 18).

“Foreigners have been increasing their net purchases of stocks not only in Korea but also in Taiwan and China since the middle of this month,” Park Sang-hyun, an analyst at HI Investment & Securities. “However, there is a slight difference among the countries as foreigners bought Chinese stocks on a large scale at the beginning of this year in anticipation of China’s resumption of economic activities, but they have no longer purchased them in recent days.”

Park attributed the recent net buying spree by foreigners to eased risks from the U.S., expectations for an improvement in the semiconductor industry, and the ongoing bullish trend in the Japanese stock market. “We believe that anxiety is easing over the U.S., including concerns over interest rate hikes, credit risks from the collapse of Silicon Valley Bank, debt ceiling negotiations, and an economic slowdown, leading to stimulating their preference for risky assets.”

“The increased stock purchases by foreigners will play a role in defending the value of the Korean currency,” he said, adding, “Whether they continue to buy stocks will depend on the pace of resolving uncertainties surrounding China’s economic normalization and reducing semiconductor inventories.”