"Different from Europe"... Foreigners 'Buy Korea' Despite Strong Dollar

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Amid the soaring value of the dollar, foreign investors are buying domestic stocks. Typically, foreigners sell stocks when a strong dollar is seen as a signal of economic crisis favoring safe-haven assets, but recently, the European natural gas crisis, which triggered concerns about an economic recession, is expected to have a limited impact on domestic companies.

According to the Korea Exchange on the 24th, foreign investors shifted from net selling in the early session to net buying within about 30 minutes after the market opened. The previous day, foreign investors sold a large volume of domestic stocks early in the session as the won-dollar exchange rate surpassed 1,345 won, driving stock prices down, but switched to buying at the end of the day, recording a net purchase of 25.3 billion won. On the 22nd, they also net bought stocks worth about 163.7 billion won. Foreign investors have net purchased nearly 2.7 trillion won worth of domestic stocks this month, far exceeding last month's net purchase record of 1.8108 trillion won. There have been only two trading days this month when foreigners net sold stocks.

This buying trend contrasts with the continuous selling of domestic stocks by foreigners since the COVID-19 pandemic. Foreigners sold over 20 trillion won worth of domestic stocks last year, which the Bank of Korea analyzed as having contributed to the depreciation of the won. However, the recent strong dollar phenomenon is mainly due to the euro's weakness caused by the surge in European natural gas prices amid the Russia-Ukraine war and the resulting eurozone recession risk, so it is interpreted that the foreign demand in the domestic stock market was less affected. Jinwoo Lee, a researcher at Meritz Securities, explained, "Typically, foreigners sell when the dollar strengthens in extreme economic crisis situations because Korean companies in emerging markets become unattractive, but the recent dollar strength stems from the weakness of the euro and yuan rather than the fundamentals of the Korean economy, so they are buying Korean stocks."

In this regard, Goldman Sachs stated in a report the day before, "Korea receives stable and inexpensive liquefied natural gas (LNG) supply through long-term contracts and equity holdings in overseas LNG projects," forecasting that the impact of the European natural gas crisis will be limited.

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