Foreign investors start selling Korean stocks except for Samsung Electronics

Foreign investors that have been net buyers of South Korean stocks this year have started to offload them, except for the country’s largest company Samsung Electronics Co.

According to the Korea Exchange on Sunday, foreigners net purchased 12.29 trillion won ($9.43 billion) in the Kospi market this year as of July 7, which is less than the amount of Samsung Electronics share purchases at 12.31 trillion won during the same period.

It is the first time this year that foreign net purchases of a single Samsung Electronics stock exceeded the total net purchases of all other stocks on the Kospi market.

Samsung Electronics accounted for 99 percent of foreign net buys on the Kospi at the end of June, up from less than 70 percent in the first quarter.

Foreigners bought Samsung Electronics for 11 consecutive trading days starting June 22, and then partially sold the stock (86.2 billion won) on July 7 when the company released its preliminary second-quarter results.

The fact that foreigners’ net purchases of Samsung Electronics exceeded their net purchases of Kospi means that they have effectively begun selling stocks other than Samsung Electronics.

Foreigners that frequently bought stocks by hundreds of billions of won per day in May turned net sellers after mid-June, pushing down the Kospi to the 2,520 range.

With the recent correction in the stock market, there is a growing consensus that expectations for a summer rally need to be tempered.

“The stock market entered the earnings season after the second quarter when consumer prices fell and the economy fared not too bad,” said Lee Woong-chan, an analyst at Hi Investment & Securities Co.

He explained stocks are becoming less attractive as an investment, with U.S. Treasury rates recently breaking through 4 percent, increasing the likelihood of further rate hikes by the U.S. Federal Reserve.

The average daily trade volume of the Kospi market reached 8.2 trillion won in the first six days of this month, down 18 percent from 10 trillion won last month, according to the Korea Exchange.

The average daily turnover rate of the Kospi also reached 0.47 percent this month, down from 0.49 percent last month.

The Boom & Shock Index, an artificial intelligence (AI)-based stock risk management indicator jointly developed by Maeil Business Newspaper and Qraft Technologies, raised the risk level for Korean stocks from 3 to 14. For U.S. stocks, it was raised from 0 to 1.

A reading of 0 to 10 indicates a reduction in cash holdings, 11 to 50 neutrality, and 51 to 100, an increase in cash holdings.