Samsung Electronics Sweeps July... Are Foreigners Making a Comeback?

[Asia Economy Reporter Koh Hyung-kwang] Foreign investors in the domestic stock market showed net buying for the first time in six months. Since the outbreak of the novel coronavirus disease (COVID-19), foreign investors had consistently been net sellers, but last month they purchased over 1 trillion won worth of stocks, marking a rare 'Buy Korea' move. As foreign investors return to the domestic stock market after a long time, expectations for a trend reversal to net buying are rising. However, concerns remain as foreign investors' net purchases are concentrated in specific stocks, including Samsung Electronics, so it is necessary to observe further whether this is a sustained trend reversal.

According to the Korea Exchange on the 3rd, foreign investors net purchased stocks worth 1.0791 trillion won in the KOSPI market last month. This is the first net buying in six months since January (304.7 billion won). Since the COVID-19 pandemic outbreak in March, foreign investors had sold stocks worth 12.555 trillion won in the KOSPI and continued net selling every month until June. However, the scale of net selling noticeably decreased for three consecutive months in April (4.1 trillion won), May (3.88 trillion won), and June (1.21 trillion won), and finally turned to net buying last month.

In particular, foreign investors net purchased 1.3113 trillion won on the 28th of last month, which is the largest daily net buying amount by foreign investors in over seven years since September 2013 (1.4308 trillion won). Over the recent six trading days, foreign investors accumulated stocks worth 2.0291 trillion won, demonstrating their presence as major players.

Unlike foreign investors, institutional investors continued their net selling trend. Following net sales of 2.7 trillion won in June, they increased the scale to over 3 trillion won last month. Individual investors purchased stocks worth 2.22389 trillion won last month, the smallest monthly buying amount this year, but maintained a net buying trend. Park Seok-hyun, a researcher at KTB Investment & Securities, said, "It is reasonable to say that foreign investors are returning in terms of trend. Although individual investors' fund inflows will not stop or decline, their strength has weakened compared to March and April, so now it will be foreign investors who drive the index upward."

However, it is regrettable that foreign investors' purchases were concentrated in specific stocks. Last month alone, foreign investors bought 2.6682 trillion won worth of Samsung Electronics shares. This amount is more than ten times that of POSCO (235.3 billion won), the second-largest net purchase stock by foreign investors. Essentially, they went 'all-in' on Samsung Electronics. The buying momentum for Samsung Electronics by foreign investors is analyzed to be driven by solid second-quarter earnings and expectations of a windfall benefit from the U.S.-China 'Huawei conflict.' Next, they purchased LG Electronics (203.5 billion won), Samsung Electronics Preferred Shares (139.5 billion won), and Samsung SDI (133.7 billion won), but the purchase amounts were not significant.

On the other hand, the stock most sold by foreign investors last month was SK Biopharm, which had a huge success through its initial public offering (IPO). They net sold 831.5 billion won, realizing profits. NCSoft (-348.6 billion won), Naver (-341.2 billion won), and Samsung Biologics (-305.6 billion won) were also among the top net sold stocks. This indicates that foreign demand has started shifting from the previously spotlighted untact (contactless) and bio sectors to large semiconductor stocks.

Whether foreign investors will continue net buying depends on the direction of the U.S. dollar's value. Han Dae-hoon, a researcher at SK Securities, said, "The Federal Open Market Committee (FOMC) meeting at the end of last month reaffirmed the pressure for a weaker dollar, and the strengthening won pressure is favorable for large-cap stocks and index levels, which is positive for the domestic stock market. The semiconductor industry outlook and the won-dollar exchange rate direction were important variables for foreign investors who had left the market, and the trend is not bad." Jeong In-ji, a researcher at Yuanta Securities, also analyzed, "Generally, when foreign investors make large-scale net purchases, if the proportion of the electrical and electronics sector is similar to its market capitalization weight, it can be seen as buying across the market. However, if not, it is difficult to regard it as a full-scale purchase of the Korean market. Confirmation of a full-scale inflow of foreign demand is still needed."

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