If Retail Investors Gain Confidence in the 'Foreign Net Buying Environment'... Box Range Upper 3200 Touch

On the 15th, the KOSPI opened at 3,108.70, up 8.12 points (0.26%) from the previous trading day, as employees were working in the dealing room of Hana Bank in Jung-gu, Seoul. The KOSDAQ opened at 965.83, up 1.52 points (0.16%) from the previous trading day. The won-dollar exchange rate started at 1,105.0 won, down 2.0 won from the previous trading day. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Lee Seon-ae] Foreign investors returned to the domestic stock market four days after the Lunar New Year holiday. Despite individual investors' anxiety over the box-range sideways movement and institutional investors such as pension funds engaging in asset allocation strategies leading to a simultaneous 'sell-off,' foreign investors absorbed all the selling volume, driving the index upward. Securities firms noted that while caution is needed in the short term due to increased volatility, if the foreign investors' net buying trend continues, the index is expected to head toward the upper bound of the box range.

On the 15th, the KOSPI index closed at 3,147.00, up 46.42 points (1.50%) from the previous trading day. The index started at 3,108.70, rose above the 3,150 level during the session, and then slightly declined. The KOSDAQ index recorded 981.97, up 17.66 points (1.83%). It opened at 965.83, up 1.52 points (0.16%), and continued to widen its gains during the session, settling above the 980 level.

The index rise on the day was thanks to the return of foreign investors. Individuals net sold 346.4 billion KRW and 151.9 billion KRW in the KOSPI and KOSDAQ markets, respectively. Institutions net sold about 421.4 billion KRW in the KOSPI market but net bought 75.2 billion KRW in the KOSDAQ market. Foreign investors net bought in both markets, with amounts of 725.8 billion KRW in KOSPI and 98.8 billion KRW in KOSDAQ.

The selling pressure from institutions, driven by individual investors' profit-taking amid concerns over continued box-range sideways movement and pension funds' asset allocation strategies, was effectively absorbed by foreign investors.

The return of foreign investors is interpreted as a result of a favorable environment for net buying.

Seosangyoung, a researcher at Kiwoom Securities, said, "During the holiday, the Philadelphia Semiconductor Index surged 5.05% due to the rapid rise of Bitcoin and President Joe Biden's executive order, leading related stocks to drive the strong start." He added, "Biden's semiconductor-related executive order is also seen as a positive investment factor as it is expected to ease parts of the US-China trade dispute initiated by former President Donald Trump."

Expectations for domestic economic recovery also played a significant role. Researcher Seo explained, "As of the 10th, Korea's export-import statistics showed a 69.1% increase year-on-year, and the average daily figure adjusted for working days surged by 39.3%, which also contributed to improving investor sentiment."

Expectations for US stimulus measures and COVID-19 vaccines also lingered. An So-eun, a researcher at IBK Investment & Securities, said, "During the Korean Lunar New Year holiday, major global stock markets maintained a risk asset preference based on expectations of economic recovery. The US stimulus package and COVID-19 vaccine news are expected to be driving forces for the domestic stock market's rise."

Positive factors related to individual sectors, such as the Coupang issue, also had a favorable impact. As a result, most sectors closed higher. Paper and wood, electrical and electronics, medical precision, and non-metallic minerals showed strength, while machinery, textiles and apparel, and electric and gas sectors lagged. All of the top 10 market capitalization stocks closed higher. The leading stock Samsung Electronics closed at 84,200 KRW, up 3.19%. SK Hynix (4.76%), LG Chem (3.13%), and Naver (NVER, 5.18%) also showed upward trends.

Whether the foreign investors' return trend will continue remains to be seen, but signals indicate a favorable environment is forming. First, expectations for the US economic stimulus package remain intact. Some House committees, including the Tax and Trade Committee, have approved key stimulus measures such as cash payments. The House plans to consolidate these bills for a full vote once each committee approves them. Since the Democrats hold a clear majority in the House, the bill's passage is expected to proceed smoothly. The minutes of the January Federal Open Market Committee (FOMC) meeting, scheduled to be released on the 18th, are also attracting market attention. The early-year debate over the Fed's tapering (reduction of bond purchases) has subsided. Kim Dae-jun, a researcher at Korea Investment & Securities, forecasted, "If the Fed maintains its policy stance regardless of inflationary pressures as previously declared, risk asset preference will increase, creating an environment where foreign investors can resume net buying of stocks."

Securities firms projected the KOSPI's expected band this week to be between 3,000 and 3,200, anticipating continued sideways movement within this range. However, if the trends of large-cap stocks like Samsung Electronics and Hyundai Motor do not break down, the index is expected to touch the upper bound of the box range. Kim Young-hwan, a researcher at NH Investment & Securities, said, "After the holiday, the Korean stock market is expected to test the upper bound of the 3,000 to 3,200 box range, driven by domestic and international policy expectations."

If individual investors who took profits on the day return to net buying, the market could gain further momentum. Kang Bong-ju, a researcher at Meritz Securities, explained, "The market needs time to absorb the elevated index, so additional gains can be sought only after some adjustment. While institutional selling and foreign investors' neutrality continue, it is difficult for individual investors alone to strongly push the index higher. However, if people gain confidence that the market will last until next year, further rises are possible."

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