Soaring Overseas Stock Investments Fluctuate Amid COVID-19 Pandemic

Global Stock Markets Stagger Amid Infectious Disease Spread
Sell-offs Increase Right After Seol Holiday
February Net Purchase Amount Drops 40%

[Asia Economy Reporter Oh Ju-yeon] As concerns grow that the novel coronavirus infection (COVID-19) crisis will act as a negative factor for the global economy, the once booming popularity of overseas stock investment is also slowing down. Until mid-February, when COVID-19 concerns were limited to China and domestic markets, the amount of funds buying overseas stocks exceeded the amount selling them, but by the end of February, it shifted to net selling. Since the beginning of the year, the daily purchase amount of overseas stocks has consistently surpassed the selling amount due to a marked preference for risk assets, but since the Lunar New Year holiday right after the COVID-19 outbreak, the selling amount has increased, signaling a change in the previously one-sided buying trend in overseas stock investment.

On the 5th, an analysis of daily overseas stock settlement amounts for January and February this year through the Korea Securities Depository's securities information portal, SEIBRO, showed that from January 29, right after the Lunar New Year holiday, the scale of overseas stocks sold exceeded the scale purchased. Domestic investors net sold overseas stocks worth 177.96 billion KRW over three days starting that day. This is an unusual phenomenon considering that net buying had been consistent until then. It is interpreted as a result of anxiety over COVID-19 after the holiday.

However, as COVID-19 concentrated more on China and domestic areas rather than spreading globally, the scale of overseas stock purchases increased again. From January 28 to 31, the first week after the Lunar New Year holiday, 156.486 billion KRW flowed out, but from February, when COVID-19 seemed to stabilize, overseas stock settlement amounts returned to net buying. The net purchase amounts were 145.8165 billion KRW in the first week of February (3rd?7th), 373.4325 billion KRW in the second week (10th?14th), and 324.827 billion KRW in the third week (17th?21st).

As confirmed COVID-19 cases spread worldwide, including Asia, the United States, Europe, and India, causing global stock markets to plummet, the scale of overseas stock settlement amounts by domestic investors began to increase more in selling than buying. From February 24 to 28, the last week of February, overseas stock settlement amounts were recorded at -340.2385 billion KRW. The net purchase amount of overseas stocks for the entire month of February was 504.39 billion KRW, a sharp decline of 40.01% compared to 841.7248 billion KRW in January.

Funds also flowed out of overseas stock funds. According to financial information provider FnGuide, a total of 185.2 billion KRW was net withdrawn from overseas stock funds in the past month. Within just one week, 110 billion KRW flowed out. By country, 114.1 billion KRW was net withdrawn from Chinese stock funds over the month, and funds decreased by 25.9 billion KRW and 24.5 billion KRW in India and Japan, respectively. This is due to growing concerns over a global economic slowdown caused by COVID-19.

The International Monetary Fund (IMF) analyzed on the 4th (local time) that the world economy will slow down more than last year's growth rate (2.9%) due to COVID-19. Kristalina Georgieva, IMF Managing Director, said, "The infection is spreading rapidly, and one-third of member countries are directly affected," adding, "How much the economy declines depends on how quickly and efficiently governments worldwide respond to the health crisis."

Global stock markets are also expected to fluctuate repeatedly in the short term depending on COVID-19. Lee Kyung-min, a researcher at Daishin Securities, pointed out, "In the short term, fluctuations in global stock markets should be considered in relation to the spread of COVID-19, economic indicator results, and the effectiveness of policies."

Seo Sang-young, a researcher at Kiwoom Securities, forecasted, "Ultimately, since the COVID-19 issue affects corporate earnings, stock market gains are expected to be limited. However, active capital injections by governments including Korea and the United States, and liquidity supply through interest rate cuts by major countries are positive for the stock market. Considering these factors, the stock market is expected to rebound in the short term, but the extent may be limited."

This content was produced with the assistance of AI translation services.