"Institutions That Threw 23 Trillion Won" Continue Selling After Announcement... Warning Signs of Stock Market Supply-Demand Instability

Box Range Sideways Ahead of Lunar New Year Holiday... Institutional Selling Pressure Increases Supply-Demand Instability
Pension Funds Lead Selling March... "Foreign Investor Trends Are a Variable, Currently Neutral"

[Asia Economy Reporter Lee Seon-ae] As the domestic stock market is expected to show sideways movement within a box range ahead of the Lunar New Year holiday, warning signals are growing that supply and demand instability will increase further after the holiday. The dominant view is that the continued selling spree by institutional investors will exacerbate supply and demand instability.

According to the Korea Exchange on the 8th, institutions have continued their selling spree since the beginning of the new year. From the first trading day on January 4 to the last trading day last week on February 5, the net selling amount by institutions was 23.8005 trillion KRW. During the same period, foreigners also net sold 4.9725 trillion KRW, but there is about a 19 trillion KRW difference in absolute amount compared to institutions. During this period, only individuals net bought 29.2746 trillion KRW, defending the stock market decline. Net selling by institutions is happening across all investor types. Financial investment, insurance, investment trusts, private equity, banks, other financial institutions, and pension funds are all selling. In particular, pension funds have the largest volume. Pension funds sold 10.0172 trillion KRW worth. This was followed by financial investment (6.7991 trillion KRW), insurance (3.0741 trillion KRW), investment trusts (2.7011 trillion KRW), private equity (1.7947 trillion KRW), and other financial institutions (419.2 billion KRW).

Pension funds set a record for the longest consecutive net selling period by selling continuously for 29 trading days in the KOSPI market from December 24 last year. During the same period, the net selling scale of institutions in the KOSPI market was 21.8684 trillion KRW, with nearly half of the volume coming from the pension fund window (10.0876 trillion KRW).

The pension funds’ selling was centered on the leading stocks that had large gains so far, namely ChaHwaJeon (automobiles, chemicals (batteries), electronics (semiconductors)). From January 4 to February 5, pension funds sold Samsung Electronics the most (3.089 trillion KRW). This was followed by Hyundai Motor (580.4 billion KRW), SK Hynix (476.7 billion KRW), LG Chem (458.7 billion KRW), Samsung SDI (400.6 billion KRW), and SK Innovation (382.4 billion KRW).

The record-breaking net selling by pension funds is analyzed as an asset allocation measure due to stock price increases. Pension funds set certain proportions for domestic and overseas stocks and bonds, and if the proportions are exceeded, they reallocate. Since November last year, as the KOSPI surged and repeatedly broke highs, pension funds sold due to exceeding the proportion of domestic stock assets. Pension funds decided to lower the domestic stock proportion from 17.3% last year to 16.8% this year.

Market experts expect the large-scale selling by institutions to continue even after the Lunar New Year holiday next week. Since each has different management strategies and some entities like investment trusts or private equity funds are exposed to redemption pressure and must sell stocks, the selling trend by institutions is not expected to end soon. Ultimately, the supply and demand of individuals and foreigners, who were the main players in the January bull market, are important for the domestic stock market.

Lee Jae-seon, a researcher at Hana Financial Investment, said, "For a trend upward movement of the index, it is important whether the buying strength of individuals, who were the main players in the January bull market, is maintained or whether the foreign investors’ supply and demand, which has determined the index direction so far, improves." He added, "If individual buying strength weakens somewhat, the main factor determining the index level will inevitably be the influence of foreigners, but currently, foreign supply and demand since the beginning of the year is neutral."

Kim Dae-jun, a researcher at Korea Investment & Securities, said, "Since individuals continue to absorb the volume poured out by institutions, a large drop in the index itself is not expected," adding, "However, as in the past, the market direction will be determined by foreigners, so foreign trading trends should be carefully observed."

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