[Good Morning Stock Market] Conditions for Improvement in Foreign Investor Supply and Demand

[Asia Economy Reporter Eunmo Koo] Since June, in the KOSPI market, foreign investors' buying momentum has formed during the phase of a short-term decline in the dollar index. On the 4th, as the dollar index's decline stabilized, foreign investors also switched to net selling. The won-dollar exchange rate has been rebounding since the 4th, and it is diagnosed that a bottom zone may be formed as it approaches the early 2018 low range. However, it is pointed out that the recovery process of the 7-week moving average is necessary to confirm the bottom.

[Image source=Yonhap News]

◆Jeong In-ji, Researcher at Yuanta Securities=On the 15th, foreign investors net sold 373.6 billion KRW in the KOSPI market, and the KOSPI closed slightly down (-0.19%). Since early last month, foreign investors had formed a buying trend, and the KOSPI had steadily continued its upward trend. However, from the 7th, foreign investors turned to net selling in the KOSPI market, net selling about 3 trillion KRW until the previous day.

The period since early June when foreign investors continuously maintained net buying almost coincided with the period when the dollar index formed a short-term downtrend. Considering that the 2.4 trillion KRW net selling by foreigners on November 30 was due to the regular change of Morgan Stanley Capital International (MSCI), foreign buying momentum continued until the 4th, when the dollar index had been declining. The dollar index shows a strong concentration phenomenon, and when the short-term downtrend stabilizes, it tends to move sideways for a while, so it is judged that the possibility of foreign investors forming a buying momentum in the short term is low.

Meanwhile, the won-dollar exchange rate has also been rebounding daily since the 4th, having fallen to about 91% based on the 52-week moving average gap and is now rebounding. It has reached the early 2018 low range, suggesting the possibility of forming a bottom zone. However, on the weekly chart, the 7-week moving average must be recovered to consider the mid-term downtrend halted, so the bottom confirmation process is still necessary.

◆Seo Sang-young, Researcher at Kiwoom Securities=The Korean stock market fell the previous day as profit-taking selling emerged, similar to the characteristics of global stock markets. In particular, it declined due to large-scale net selling by foreigners and institutions. However, as foreigners switched to net buying in futures, the decline was limited. Meanwhile, the US stock market rose as expectations for additional stimulus measures and improved earnings prospects for Apple increased. Although regulatory policies on large tech stocks posed a burden, these positive factors are expected to have a favorable impact on the Korean stock market. Especially, the negotiation content of the US congressional leadership meeting at 6 a.m. is noteworthy as it may affect the Korean stock market.

Meanwhile, Apple surged more than 5% after news emerged that it requested parts suppliers to increase iPhone production by 30% in the first half of next year. This suggests strength in related stocks in the Korean stock market. Of course, news that Korean companies may be included in European large tech stock regulatory laws could increase the possibility of selling pressure on related companies. However, considering that the US stock market's large tech stocks with high earnings improvement expectations have rebounded despite these regulatory policies, the impact is expected to be limited. Taking this into account, the Korean stock market is expected to develop a market centered on small and mid-cap stocks with high earnings improvement expectations rather than large tech stocks with regulatory concerns and high profit-taking desires.

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