"Will the Stock Market Recover After the Adjustment? A Market Focused Only on Foreigners"

Foreigners Sell Over 17 Trillion Won on KOSPI in First Half... Sell 2.5 Trillion More in Second Half
Leading Index Direction... "Buying Could Accelerate Once Tapering Issue Passes"

[Asia Economy Reporter Song Hwajeong] There is no sign that foreigners, who hold the lead in index movements, are about to turn around. However, some forecasts suggest that the selling pressure from foreigners will come to an end once the correction is over.

According to the Korea Exchange on the 12th, foreigners sold more than 17 trillion won in the KOSPI market in the first half of the year, and have already sold about 2.5 trillion won in the second half. They have continued to sell for five consecutive weeks on a weekly basis.

Park Seungyoung, a researcher at DB Financial Investment, analyzed, "Looking at the characteristics of foreign demand and supply last year and this year, the most important factor was that changes in the top benchmarks had a greater impact on foreign demand and supply." He added, "Next, preferences diverged between tech-centered markets like Korea and Taiwan, and commodity-centered markets like Brazil, South Africa, and the Middle East, depending on the direction of global inflation." Foreigners net purchased $22.2 billion in the Indian market last year and $7.9 billion this year. Park explained, "This shows that net purchases unrelated to macro factors were made," adding, "It is probably because the foreign investors' purchase limit for Indian stocks was expanded, increasing their weight in the global benchmark."

While the selling pressure continues, foreigners still appear to hold the lead in the market. Most of the time, when foreigners sell, the index falls, and when foreigners buy, the index rises, indicating that they have a significant influence on the index direction. In the past 10 days, the KOSPI has moved in tandem with foreign trading on 9 days.

On this day as well, the KOSPI succeeded in reversing to an increase after four days, and foreigners also showed buying pressure for the first time in four days. As of 9:35 a.m., the KOSPI recorded 3,245.79, up 27.84 points (0.87%) from the previous trading day, and foreigners net purchased 44.5 billion won. Analysts say that the KOSPI's record highs were possible because of foreigners. Han Hyungkuk, a researcher at Hanwha Investment & Securities, analyzed, "Summing up foreign trading on days when record highs were made since last year, net purchases amount to 9 trillion won," adding, "On the other hand, individuals net sold 4 trillion won, so ultimately, the record highs were created by foreigners."

There is a high possibility that the selling pressure from foreigners will come to an end soon. Ha Inhwan, a researcher at KB Securities, explained, "Referring to the 2013 taper tantrum case, foreigners switched to net buying after the tapering (asset purchase reduction) issue passed," adding, "This time as well, it is highly likely that foreign buying of emerging market stocks will begin in earnest after the tapering issue passes." It is especially expected to turn first in the KOSDAQ. Foreigners have net purchased 82.3 billion won in the KOSDAQ since the second half of the year. Ha added, "I believe that non-arbitrage program selling will end first in the KOSDAQ," explaining, "Looking at cumulative non-arbitrage net purchases since 2003, the KOSDAQ has about 1% remaining relative to free float market capitalization, while the KOSPI has 3.1% remaining, which means that the remaining volume available for additional selling is much smaller in the KOSDAQ than in the KOSPI."

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