Foreign investors net buy $675 mn in Kospi stocks over 5 days in September

This photo was taken on Sep. 5. [Photo by Yonhap]

Foreign investors resumed their buying spree in the South Korean stock market this month, purchasing more than 900 billion won ($674.7 million) worth of Kospi stocks over three trading days.

According to financial data tracker Yonhap Infomax on Wednesday, foreigners net purchased shares worth 923.7 billion won in the stock market during the first five days of this month. The net buying trend continued for three consecutive trading days with 368.6 billion won on Friday, 407.2 billion won on Monday, and 147.8 billion won on Tuesday.

It is only the beginning of the month, and it remains to be seen whether foreigners are back in a buying mood, but the market is expectant that foreign investor demand continue to rise.

Foreign investors had been driving the Kospi Index upwards, net buying Kospi stocks for five consecutive months from January to May this year. However, they started net selling shares worth 1.47 trillion won in June and continued their selloff with 1.99 trillion won in July and 937.8 billion won in August.

The net selling streak continued for five consecutive trading days until August 31, raising concerns over demand.

Some analysts added that foreign demand may draw an upward curve as the theme stock craze recently faded in the domestic stock market and secondary battery stocks were at the center of foreigners’ net selling.

Foreigners net sold 4.86 trillion won in Kospi steel and metal stocks, including several secondary battery stocks, between June and August. In contrast, individuals that had been leading the secondary battery theme stock frenzy net bought 5.37 trillion won in the same stocks during the same period.

Given that foreigners’ total net selling on the Kospi amounted to 3.98 trillion won during the period, they likely bought more shares in sectors outside steel and metals. In fact, foreign investors bought 2.27 trillion won in the electric and electronics sector, including semiconductor stocks such as Samsung Electronics Co., during the same period.

The slowing year-over-year decline in domestic exports signals another positive outlook for foreign demand. The fall in Korean exports bottomed out as it dropped to 8.4 percent in August from 16.4 percent in July.

“History shows that foreigners tend to buy Korean stocks when domestic export and corporate profit estimates hit a low,” Kiwoom Securities Co. analyst Han Ji-young said. “While trading could change frequently until the Federal Open Market Committee (FOMC) meeting this month, we recommend setting a market response strategy on the premise that foreigners will show a net buying trend focused on key sectors such as semiconductors.”

But others voiced concerns that market volatility could increase as individuals, who have been the main drivers of demand, turn to selling.

“Demand from individuals and foreigners on the Kospi market are headed in completely opposite directions,” according to Noh Dong-gil, an analyst at Shinhan Investment & Securities Co. “We expect individual net selling to begin in the fourth quarter once foreign funds come in. Sectors with a large share of individual purchase such as steel that saw a relatively high growth in stock prices need to prepare for volatility.”