15 Trillion in Two Months... Endless Foreigners' 'Sell Korea'

On the 23rd, the KOSPI index opened at 1471.81, down 94.34 points (6.02%) from the previous trading day, as dealers were working in the Hana Bank dealing room in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Koh Hyung-kwang] Since the first confirmed case of the novel coronavirus infection (COVID-19) in South Korea, foreigners have sold stocks worth 15 trillion won in the KOSPI market over the past two months. This is the largest amount of sales ever recorded. In particular, during the 12 consecutive trading days of net foreign selling until the 20th, foreigners sold stocks worth more than 9 trillion won. This is also the largest amount during a continuous net selling period. Experts predict that the foreign selling trend will continue until a turning point such as the development of a treatment for COVID-19 occurs.

According to the Korea Exchange on the 23rd, foreigners sold a total of 14.9604 trillion won worth of stocks in the securities market over about two months from January 20, when the first domestic COVID-19 case was confirmed, until the 21st of this month. Following last month's 3.3132 trillion won, foreigners have already net sold 10.0948 trillion won this month.

Since the pandemic phase began on the 24th of last month, foreigners have continued massive net selling almost every day except for one day on the 4th of this month. The net selling amount during this period reached 13.5564 trillion won. On the 9th, the largest single-day net selling record in the history of the Korean stock market (1.3125 trillion won) was also broken.

Although the recent streak of foreign net selling is far from the longest consecutive net selling record, the scale of net selling is the largest ever. The longest consecutive foreign net selling record was 33 trading days from June 9 to July 23, 2008, just before the financial crisis. The cumulative net selling during that period was 8.98 trillion won. From the 5th to the 20th of this month, foreigners' cumulative net selling was 9.1526 trillion won, surpassing that record.

Foreigners' selling was concentrated in semiconductor stocks. Over the past two months, the top three stocks in foreign net selling were Samsung Electronics, SK Hynix, and Samsung Electronics preferred shares, with net sales of 6.7452 trillion won, 1.3338 trillion won, and 1.105 trillion won, respectively. The total sales amount of these three stocks was 9.184 trillion won, accounting for 61.3% of the total net selling amount (14.9604 trillion won).

The large-scale selling of semiconductor stocks by foreigners is analyzed not as a forecast of future industry downturns but as an unavoidable move to reduce the weighting of Korean stocks in their portfolios. Roh Dong-gil, a researcher at NH Investment & Securities, explained, "The reason foreigners are selling semiconductor stocks such as Samsung Electronics and SK Hynix in large quantities is not because they expect a downturn in the semiconductor industry. Rather, as they withdraw funds from emerging markets including Korea, they have no choice but to pull money out of stocks where a relatively large amount of funds have been invested."

Market experts expect the foreign selling trend to continue until the spread of COVID-19 slows down in the US and Europe and news of treatments becomes visible. Seo Sang-young, a researcher at Kiwoom Securities, said, "Currently, COVID-19 cases are increasing mainly in the US and Europe, and concerns about economic recession and credit risk remain. Confirming whether COVID-19 is under control is a priority, and until specific measures to address credit risks related to bad assets in the US are announced, short-term foreign selling and increased volatility seem inevitable."

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