Foreign Selling Pressure Eases?

Average Daily Net Selling Decreases from 560 Billion KRW to 240 Billion KRW

Foreign Investors Buy High-Performing Stocks like Samsung Biologics

[Asia Economy Reporters Koh Hyung-kwang, Song Hwa-jung] Since the outbreak of the novel coronavirus disease (COVID-19), foreign investors have continued to sell off in the domestic stock market. However, recently, they have eased the selling pressure by focusing on buying stocks with improved earnings, indicating a move to adjust supply and demand.

According to the Korea Exchange on the 27th, foreign investors net sold a total of 20.2441 trillion KRW in the KOSPI market over two months from February 24 to the previous trading day, the 24th of this month. This was the result of foreign investors withdrawing large-scale funds from the domestic stock market since the end of February when COVID-19 spread.

During this period, foreign investors recorded net buying on only two days: March 4 (153.4 billion KRW) and April 17 (322.9 billion KRW). Notably, from March 5 to April 16, foreign investors continued a 30-trading-day consecutive selling streak, marking the second-longest net selling record in history. The longest selling period was 33 trading days from June 9 to July 23, 2008, during the global financial crisis.

The positive aspect is that the scale of foreign selling has somewhat eased. While foreign investors net sold a total of 12.555 trillion KRW in the KOSPI during the peak panic selling last month, they sold 4.2275 trillion KRW up to the 24th of this month. The average daily net selling amount decreased to less than half, from 560 billion KRW last month to 240 billion KRW this month. Days with selling pressure exceeding 500 billion KRW were 14 trading days last month but only 4 trading days this month.

The recent easing of foreign investors' selling pressure appears to be due to the slowdown in the increase of COVID-19 cases in the US and Europe. Experts predict that foreign investors' supply and demand could change depending on whether the COVID-19 situation clearly subsides and economic activities resume. Seo Sang-young, a researcher at Kiwoom Securities, said, "As the spread of COVID-19 shows signs of calming down and liquidity is supplied through coordinated monetary policies by major central banks, anxiety is gradually decreasing, so the return of foreign investors does not seem far off."

There is also an opinion that further KOSPI gains will be difficult until foreign investors' net buying is confirmed. Lee Kyung-min, a researcher at Daishin Securities, said, "The KOSPI is expected to continue a resilient upward trend in the second quarter due to supply-demand momentum from foreign investors' net buying and expectations for economic recovery," but added, "Considering the accumulated fatigue from the recent short-term sharp rise in stock prices, it is necessary to keep in mind the possibility of a slowdown depending on economic indicators and earnings announcements."

Recently, foreign investors have continued buying mainly stocks with good earnings. Many of the top net purchased stocks last week recorded strong first-quarter earnings this year.

The stock most bought by foreign investors last week was Samsung Biologics, with a net purchase of 64.4 billion KRW. Next was LG Household & Health Care, purchased for 54.7 billion KRW. Both companies posted surprise earnings in the first quarter. Samsung Biologics recorded an operating profit of 62.6 billion KRW in Q1, turning profitable compared to the same period last year, and LG Household & Health Care also saw sales and operating profit increase by 1.2% and 3.6% year-on-year in Q1 despite the impact of COVID-19.

Other stocks net purchased include Celltrion (35.9 billion KRW), Kakao (32 billion KRW), Hyundai Mobis (29.5 billion KRW), NCSoft (20.2 billion KRW), Naver (18.1 billion KRW), and Hanjin KAL (14.8 billion KRW). Among them, Naver also exceeded market expectations by recording Q1 sales and operating profit of 1.7321 trillion KRW and 221.5 billion KRW, up 14.6% and 7.4% year-on-year, respectively. Lee Kyung-soo, a researcher at Hana Financial Investment, said, "As corporate earnings are generally being revised downward this year, foreign investors will continue to focus their buying on stocks with improving earnings."

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