Foreign Exodus "Even Large-Cap Stocks Shunned"... Will Samsung Electronics' Stake Fall Below 50%?

Signs of Samsung Electronics' Foreign Ownership Falling Below 50%
Number of Companies with Over 50% Foreign Ownership Down by 5 to 34
Net Selling Eases and Stance Changes Amid Dollar Stabilization Phase

[Asia Economy Reporter Lee Seon-ae] The foreign ownership ratio of Samsung Electronics has fallen to a level threatening the 50% mark.

According to the Korea Exchange on the 22nd, as of the previous day, the foreign ownership ratio of Samsung Electronics was recorded at 51.75%. On January 2, 2020, and January 4, 2021, the foreign ownership ratios were 56.81% and 55.73%, respectively. Over the past two years, it has maintained an average of around 53-54%, but has steadily decreased, showing signs of breaking below 50%.

In particular, this month, the average daily net selling volume by foreigners has approached 400 billion KRW (384.7 billion KRW), indicating unusual activity. This is the highest figure since March 2020, when COVID-19 broke out with 569 billion KRW, and May 2021 with 446.9 billion KRW.

Foreign investors have shown a selling preference since 2020. The net selling amount in the KOSPI market alone from 2020 to the 18th of this month reached 55.596 trillion KRW. The months with average daily net buying volume were only three months in 2020 and four months in 2021. The problem is that this year, they are reducing their semiconductor holdings. This month, until the previous day, foreigners net bought Samsung Electronics only on two days.

The foreign ownership ratio of Samsung Electronics has stably maintained above 50% since 2010. Although it temporarily fell below 50% in 2013, 2015, and 2016, it quickly recovered.

Not only Samsung Electronics but also other major domestic stocks are experiencing strong foreign selling pressure. The foreign ownership ratio of Hyundai Motor Company decreased from 39.80% on January 2, 2020, to 26.30% on the 21st. The number of companies with foreign ownership exceeding 50% of total shares is 34, five fewer than the previous year.

Lee Jin-woo, a researcher at Meritz Securities, explained, "Since 2016, foreign buying in sectors other than semiconductors has stagnated, which is not a recent phenomenon, but even semiconductors, the only sector where the proportion was expanding, are now being reduced. In the case of Samsung Electronics, the ownership ratio is approaching 50%, a level not significantly fallen below since 2011." He added, "The foreign ownership ratios of major domestic companies, where foreign selling was concentrated, have fallen to levels seen during the financial crisis or the lowest since then."

The background for the increased foreign net selling movement this year is the sharply rising won-dollar exchange rate. Concerns about inflation and the expansion of geopolitical risks in Ukraine have strengthened the preference for safe assets, leading to a stronger dollar. As a result, the won-dollar exchange rate surpassed the 1,200 KRW per dollar level, considered a turning point for foreign demand in the domestic stock market. Lee Kyung-soo, a researcher at Hana Financial Investment, explained, "The Russia-Ukraine war, various sanctions spreading to the Chinese sphere, and cost burdens due to rising raw material prices are reflecting anxiety. A high preference for safety continues, causing capital outflows from emerging markets, which symbolize risk assets."

As the dollar's strength is expected to continue for some time, it seems difficult for foreigners to rapidly switch to net buying in the domestic stock market. This essentially means that a complete upward turnaround in the domestic stock market is unlikely.

However, there is a positive outlook that foreign selling may ease somewhat as uncertainty is resolved following the confirmation of a planned rate hike stance at the March Federal Open Market Committee (FOMC) meeting. The dollar index, which had risen above 99 before the FOMC meeting, has dropped to the 97-98 range. Lee Kyung-min, head of the investment strategy team at Daishin Securities, said, "Foreign investors will be the main players leading the revaluation of KOSPI valuation. If global macroeconomic changes and dollar stabilization coincide after the second quarter of this year, a change in stance among foreign investors is expected."

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