Korean stock market falls amid foreign fund exodus

(Yonhap)

Samsung Electronics Co.’s stock is facing the risk of dropping below the 50,000 won ($35.55) level as global investment funds flow into the United States.

The South Korean tech giant has experienced a complex crisis with foreign investors selling off its shares, spurred by a disappointing third-quarter 2024 performance, the rise of Chinese memory semiconductor manufacturers, and delays in corporate reforms.

According to the Korea Exchange on Wednesday, foreign investors sold a net 1.12 trillion won ($795.79 million) in the main Kospi market from last Thursday to Wednesday, shortly after the U.S. presidential election, with Samsung Electronics’ net sell volume hitting 1.82 trillion won during this period.

Foreign investors led a net sell of 733.8 billion won on Wednesday, pushing the benchmark Kospi index down 2.64 percent from the previous day to close at 2,417.08.

“The Korean stock market currently continues to face internal and external uncertainties, and there are no leading stocks to drive further momentum,” DS Investment & Securities Co. analyst Woo Ji-yeon said. “The Kospi is likely to continue in a boxed range after a technical rebound.”

The secondary Kosdaq index also dropped 2.94 percent, falling below the 700 mark, as retail investors shifted their funds towards Bitcoin and U.S. stocks, weakening the demand. Stocks in bio and cosmetics sectors were hit hard without any significant adverse factors.

The Korean government, meanwhile, began preparing measures to respond to the sharp decline in the stock market.

“The issue will be discussed during a meeting of economy-related ministers on Thursday, and financial authorities will announce relevant measures,” a senior official from the presidential office said on Wednesday.

“As tackling polarization is a goal for the latter half of the presidential term, we need measures to address polarization in the asset market,” the official added.

For its part, the Korean won ended the day‘s trading at 1,406.6 against the U.S. dollar, down 3.1 won from the previous day. The won came under intense downward pressure as foreign investors withdrew from the local stock market and the Chinese yuan also weakened. The clear trend of a strong dollar, bolstered by expectations of a rise in long-term U.S. interest rates, also played a role.

The market is beginning to see 1,400 won per dollar as the “new normal” for the time being.

As a result, a foreign investor exodus is likely to intensify, leading to rising import prices as intermediate goods become more expensive, worsening trade conditions in a chain reaction.

“Although the dollar trend could change depending on trade pressures after President-elect Donald Trump’s inauguration, the strong dollar is expected to persist in the short term, stabilizing the won at the 1,400 level,” iM Securities Co. analyst Park Sang-hyun said.

The Financial Services Commission said during a meeting on the same day that “we are closely watching the increased volatility in the financial market after the U.S. election” and will “implement market stabilization measures worth 38 trillion won in 2025, with a commitment to take necessary measures promptly should instability spread.”