"Emerging Market Stocks Unstable"…Foreigners Sell Off Simultaneously

Sold Over 7 Trillion Won Domestically This Month... Twice Last Month's Net Selling Volume
Foreigners 'Selling' in Taiwan, India, Brazil, Thailand, and More

On the 1st, dealers are working in the dealing room of KEB Hana Bank in Jung-gu, Seoul, as the KOSPI continues its decline from the previous day, threatened by the 2010 level due to net selling by both foreign and institutional investors. On the same day, the won-dollar exchange rate started at 1,188.0 won, up 4.9 won from the previous trading day. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Minwoo Lee] Since the beginning of this month, foreign investors' net selling has sharply increased in major emerging markets such as Taiwan, South Korea, India, and Brazil. This appears to be due to growing concerns over stock market volatility amid the spread of the novel coronavirus infection (COVID-19).

According to Yuanta Securities on the 19th, foreign investors have net sold a total of $5.814 billion (approximately 7.3 trillion KRW) in the domestic stock market over the two weeks up to the 13th of this month. This is nearly double last month's $3 billion.

Taiwan was the only emerging market with a larger scale of foreign net selling than South Korea. It recorded the highest amount at $6.722 billion, significantly surpassing last month's $3.586 billion.

Other major emerging markets also saw continued foreign net selling, including India ($3.82 billion), Brazil ($3.175 billion), Thailand ($1.295 billion), Indonesia ($213 million), Vietnam ($127 million), the Philippines ($123 million), Pakistan ($40 million), and Sri Lanka ($6 million).

This is interpreted as a result of increased stock market volatility due to the COVID-19 pandemic, which has dampened investor sentiment. In particular, countries with a high export ratio are experiencing greater shocks as nations control entry and exit and restrict logistics exchanges to prevent the spread of COVID-19. This is also why the stock markets of South Korea and Taiwan have plummeted. The KOSPI closed at 1,591.20, down more than 10% from the previous session. Compared to the beginning of the year’s record of 2,277.23, it has fallen 30.2%. Taiwan’s TAIEX index also dropped 23.2% compared to the start of the year.

Although governments worldwide are rolling out various stimulus measures, they are insufficient to soothe the uneasy investor sentiment. Analysts suggest that the markets could still decline further until the spread of COVID-19 subsides in the U.S., Europe, and the Middle East, and a fundamental treatment is developed. Changmin Lee, a researcher at KB Securities, said, "The average decline rate of 13 emerging market stock indices, including the Morgan Stanley Capital International (MSCI) Emerging Markets Index, compared to their pre-COVID-19 peak is 28%, which is about half of the 55% decline during the 2008 global financial crisis. Considering meaningful support levels since 2015, an additional 7-10% adjustment may occur."

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