Foreigners Selling Off Continuously, 'Escape Rush' from Emerging Markets

KOSPI Drops for 11 Consecutive Trading Days with 'Sell Korea' Trend... Stock Markets in Taiwan, Brazil, Russia Also Plunge

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[Asia Economy Reporter Geum Bo-ryeong] While foreigners have been leading the market decline by net selling in the KOSPI market for 11 consecutive trading days, emerging markets are also exposed to similar situations.

According to the Korea Exchange on the 20th, foreigners net sold 617.8839 billion KRW in the KOSPI market the previous day. Net selling has continued for 11 consecutive trading days since the 5th. The total value of KOSPI stocks net sold by foreigners during this period amounts to 8.56828351 trillion KRW.

From the 24th of last month, when the 'Sell Korea' trend began in earnest, until the day before, foreigners net sold a total of 13.1254 trillion KRW over 18 trading days. Foreigners showed net selling in the KOSPI market for 17 days, except for the 4th.

The 11 consecutive trading days of foreign net selling is not very long compared to the longest on record. Since January 4, 1999, when the Korea Exchange started keeping data, the longest was 33 consecutive trading days of net selling from June 9 to July 23, 2008. The cumulative net selling amount at that time was also 8.9834 trillion KRW. As of the previous day, the cumulative net selling amount ranks third all-time.

Experts analyze that strong foreign net selling in the KOSPI tends to be concentrated over a short period based on past cases. Dongwan Kim, a researcher at Eugene Investment & Securities, explained, "Since similar periods were concentrated in July 2007 and early 2008, the foreign selling triggered by the novel coronavirus infection (COVID-19) this time is likely to repeat in a short period like past cases."

Emerging market stock exchanges such as China, Hong Kong, and Taiwan are not much different from the domestic market. Foreigners are showing strong net selling. Jaeseon Kim, a researcher at Hana Financial Investment, said, "As the dollar is strong overall against emerging market currencies and liquidity is drying up, currency weakness continues, causing emerging markets to undergo broad adjustments." Kyunghwan Kim, also a researcher at Hana Financial Investment, analyzed, "Due to the outflow of foreign capital from emerging markets, China is also exposed to external supply-demand volatility."

In Taiwan's case, it is undergoing adjustments similar to Korea due to being an export country. The Taiwan Weighted Index, which was 11,321.81 on the 6th, fell to 8,681.34 the previous day, dropping 23% in 10 trading days. During the same period, India's SENSEX index also synchronized with the global panic market, falling 24% from 37,576.62 to 28,288.23; Brazil's Bovespa index dropped 30% from 97,996.77 to 68,331.80; and Russia's RTS index fell 28% from 1,257.96 to 902.63. Researcher Kyunghwan Kim said, "Brazil and India are also expected to continue a highly volatile market next week."

The reason why the decline in the Chinese stock market is relatively smaller than domestic despite foreign net selling is due to differences in the market system. Researcher Kyunghwan Kim diagnosed, "Foreigners hold only about 4% of Chinese stocks, and their trading contribution rises to about 8% at peak times, but this is still about one-third of Korea's level. Foreigners have recently been continuously selling large-cap stocks in the Shanghai and Shenzhen stock exchanges."

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