Foreigners Net Buyers in 12 Weeks... Is 'Buy Korea' Emerging?

[Image source=Yonhap News]

[Asia Economy Reporter Koh Hyung-kwang] Foreign investors have finally turned to net buying in the domestic stock market. It is the first time in 12 weeks on a weekly basis. The securities industry is hopeful that foreign investors are beginning a full-scale 'Buy Korea' movement. However, with the real economy crisis triggered by the novel coronavirus disease (COVID-19) intensifying, many remain cautious, saying it is premature to view this as a fundamental trend reversal.

According to the Korea Exchange on the 3rd, foreign investors net purchased 127.4 billion KRW in the KOSPI market last week. This marks a return to 'buying' after 12 weeks since the first week of February (234.9 billion KRW). Although the market was open for only three trading days from the 27th to the 29th of last month, it is noteworthy that foreign investors, who had consistently engaged in large-scale net selling, changed their trading pattern.

From February 10th to March 24th, foreign investors sold a total of 20.9148 trillion KRW worth of stocks in the KOSPI market over 11 weeks, amounting to about 21 trillion KRW. This was a result of withdrawing large-scale funds from the domestic stock market amid the spread of COVID-19. During this period, foreign investors recorded net buying on only six trading days. Notably, from March 5th to April 16th, foreign investors maintained a 30-trading-day consecutive 'selling' streak, marking the second-longest net selling record in history. The longest selling period was during the global financial crisis from June 9th to July 23rd, 2008, lasting 33 trading days.

The change in the trading pattern of foreign investors, who sold off Korean stocks in bulk for over two months, is attracting the attention of market participants. While foreign investors net sold a total of 12.555 trillion KRW in the KOSPI during March, when panic selling was at its peak, they sold 4.1001 trillion KRW last month. The average daily net selling amount decreased by more than half, from 560 billion KRW last month to 230 billion KRW this month. The number of days with selling pressure exceeding 500 billion KRW was 14 trading days in March but only 4 trading days last month.

Moreover, with foreign investors turning to net buying last week, expectations are rising that they are beginning a full-scale 'Buy Korea' movement. Kiwoom Securities researcher Seo Sang-young diagnosed, "Positive factors such as U.S. President Donald Trump's signing of an additional economic stimulus package, the Bank of Japan's unlimited government bond purchases, and domestic financial holding companies' first-quarter earnings exceeding expectations have improved investor sentiment." Lee Kyung-min, a researcher at Daishin Securities, predicted, "The selling pressure from foreign investors in the KOSPI market has peaked," adding, "In the second quarter, amid a phase of global liquidity expansion, foreign investors' net buying inflows into the KOSPI will be only a matter of time."

However, some analyses caution that it is too early to conclude that foreign investors have switched to buying, given the persistent risks such as the possibility of COVID-19 resurgence, sharp fluctuations in international oil prices, and North Korean risks. Kim Yong-gu, a researcher at Hana Financial Investment, explained, "Considering many factors such as the possibility of COVID-19 resurgence, oil price instability, and earnings, it is difficult to make a definitive statement about (foreign investors' net buying)." He added, "If corporate earnings deterioration materializes in the second quarter, it is expected to be reflected in stock prices, so we need to observe a bit longer before confirming a net buying shift by foreign investors."

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