Foreign Investor Expected to Return... Turns to Net Selling After One Month

Foreign Investors in August: Net Selling of KRW 1.066 Trillion in Domestic Stocks, Net Investment of KRW 997 Billion in Bonds

[Asia Economy Reporter Eunmo Koo] Foreign investors who had purchased domestic stocks in July for the first time in six months have turned to selling again after just one month. However, in the bond market, they maintained a net investment trend for eight consecutive months.

According to the "August Foreign Securities Investment Trends" released by the Financial Supervisory Service on the 7th, foreign investors net sold 1.066 trillion KRW worth of domestic listed stocks last month. On the other hand, they made a net investment of 997 billion KRW in listed bonds, resulting in a net withdrawal of 69 billion KRW. As of the end of last month, foreigners held a total of 740.2 trillion KRW in listed securities, including 589.2 trillion KRW (30.0% of market capitalization) in listed stocks and 151.2 trillion KRW (7.5% of outstanding amount) in listed bonds.

Last month, foreigners net sold a total of 1.066 trillion KRW, with 781 billion KRW in the KOSPI market and 285 billion KRW in the KOSDAQ market, reversing back to net selling just one month after switching to net buying in July. Previously, foreigners had net sold over 26 trillion KRW over five months, starting with 3.225 trillion KRW in February, 13.45 trillion KRW in March, 5.393 trillion KRW in April, 4.062 trillion KRW in May, and 420 billion KRW in June. Then, in July, they net bought 582 billion KRW, rekindling expectations of a "return of foreigners" to Korean stocks after six months, but switched back to selling within a month.

The selling by foreigners in August is interpreted to have been influenced by the rebalancing of the Morgan Stanley Capital International (MSCI) index and disappointment with the Bank of Korea's Monetary Policy Committee. Haedoon Han, a researcher at SK Securities, explained, "At the end of August, there was a large amount of mechanical selling by foreigners ahead of the MSCI index rebalancing, and disappointment over the downward revision of the growth forecast at the August Monetary Policy Committee also seems to have had an impact."

By region, Europe net bought 800 billion KRW, but the Middle East and the Americas net sold 700 billion KRW and 600 billion KRW respectively. By country, Switzerland (200 billion KRW) and Australia (200 billion KRW) net bought, while the United States (700 billion KRW) and the United Arab Emirates (600 billion KRW) net sold.

In terms of holdings, the United States accounted for 244.5 trillion KRW, representing 41.5% of all foreign holdings. This was followed by Europe with 176.8 trillion KRW (30.0%), Asia with 79.3 trillion KRW (13.5%), and the Middle East with 22 trillion KRW (3.7%).

In the bond market, the net investment trend continued. Last month, foreign investors net purchased 3.815 trillion KRW worth of domestic listed bonds, and despite 2.818 trillion KRW maturing and being repaid, a net investment of 997 billion KRW was made. This marked the eighth consecutive month of net investment since January. With the continuation of the net investment trend, foreigners’ domestic bond holdings increased by 800 billion KRW from the previous month to 151 trillion KRW as of the end of August.

By region, net investments were made in Asia (900 billion KRW) and the Middle East (400 billion KRW), while Europe saw a net withdrawal of 100 billion KRW. In terms of holdings, Asia had the largest amount at 70.7 trillion KRW, accounting for 46.8% of total foreign investment, followed by Europe (47.1 trillion KRW, 31.2%) and the Americas (12 trillion KRW, 8.0%).

By bond type, net investments were made in government bonds (400 billion KRW) and Monetary Stabilization Bonds (400 billion KRW). The outstanding balance was 119.6 trillion KRW for government bonds, accounting for 79.2%, and 31.4 trillion KRW (20.8%) for special bonds. By remaining maturity, net investments were made in bonds with maturities between 1 and 5 years (1.3 trillion KRW) and over 5 years (300 billion KRW), while bonds with less than 1 year maturity saw net withdrawals of 600 billion KRW.

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