Foreign net sales of Korean stocks reach $1.14 billion in three days

Foreign investors have recently started selling their holdings, raising concerns that selling by foreigners, who have been driving the recent stock market gains, may persist in the long term.

According to the Korea Exchange and sources from the financial investment industry, foreigners sold a net 1.47 trillion won ($1.14 billion) worth of stocks on the main Kospi market in the three days from Monday to Wednesday. Foreigners, however, were net buyers of Samsung Electronics Co. shares worth 57 billion won, while limiting their net selling of SK hynix Inc. shares to 13 billion won in the last three days.

Looking at the daily trading trends, foreign investors net purchased 27.4 billion won and 67.1 billion won worth of Samsung Electronics shares on Monday and Tuesday, respectively, before net selling 37.4 billion won worth of its shares on Wednesday.

As for SK hynix, foreign investors net purchased 20.1 billion won worth of shares on Tuesday, but net sold 6 billion worth of shares on Wednesday.

Earlier, foreigners had focused on buying stocks in the Kospi market. Their net purchases until Wednesday reached 12.9 trillion won. It is the first time since the first half of 2019 that foreigners recorded net purchases in the stock market in the first half of the year.

Among the net purchases made by foreigners, shares of Samsung Electronics accounted for 10.91 trillion won and those of SK hynix 1.69 trillion won.

The ownership ratio of Kospi stocks by foreign investors is at its highest level in a year and 10 months at 18.55 percent. The foreign ownership ratio of Samsung Electronics is also at its highest level in 1 year and 10 month, at 52.59 percent, while that of SK Hynix is approaching close to 51.9 percent, the highest level since September 2019.

Foreigners seem to have concentrated on buying Samsung Electronics and SK hynix shares as expectations rose for an improvement in the semiconductor market.

SK hynix Inc. headquarters in Icheon, Gyeonggi Province [Photo by Yonhap]

Experts say that the recent selling by foreigners should be viewed as profit-taking driven by the perception of short-term overheating.

There are also views that concerns about an interest rate hike by the U.S. Federal Reserve at the next Federal Open Market Committee (FOMC) meeting next month also spurred investors to sell.

“Investors are focusing on the possibility of additional rate hikes by the Fed and there is a strong perception that the market has entered a short-term overheating phase,” said Kim Ji-san, head of Kiwoom Securities Co.’s research center. “Market volatility may persist as some profit-taking takes place.”

He also noted that stock prices may undergo a period of correction in the process of resolving uncertainty related to the rate hike cycle. “As the semiconductor industry has also experienced a short-term surge, there is a desire for profit-taking,” he added.

There are views within the market that the selling pressure from foreign investors and the market correction will be short-lived.

“As foreigners have bought a lot of stocks and the Korean won has strengthened, foreigners’ investment momentum seems to have weakened and entered a lull.” said Lee Kyung-soo, head of the research center at Meritz Securities Co.

“However, if the attractiveness of non-dollar assets increases, foreign investors will start buying dtocks in the emerging markets and from the perspective of foreign investors, the Chinese market is currently not as attractive, so they may feel our stock market is more attractive,” he said.

He also noted that foreign investors are paying attention to the possibility of a turnaround in the semiconductor industry and have a positive outlook on the battery and automobile industries.

Lee Kyung-min, head of the investment strategy team at Daishin Securities Co., said that “if the benchmark Kospi overcomes short-term overheating and enters the 2,500 range, we see it as an opportunity to increase stock holdings.” He recommended semiconductor, battery and automobile stocks as attractive targets.