Despite Inflation and Strong Dollar, Foreigners Continue to 'Buy'

5 Trillion Won Net Purchase in the Second Half of This Year
"Positive Supply and Demand vs Limited Rotation"

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Foreign investors have shown a net buying trend amounting to 5 trillion KRW in the domestic stock market since the second half of this year. Securities firms have expressed both positive views from a supply-demand perspective and assessments that this may be limited to rotational trading.

On the 29th, Asia Economy analyzed the trading trends by investor type in the domestic stock market from July 1 to August 26 of this year, revealing that foreign investors purchased approximately 4.94 trillion KRW during this period. In the same period, institutional and individual investors net sold 4.4 trillion KRW and 26.5 billion KRW worth of stocks, respectively.

The trading flow from August 22 to 26, when the dollar showed ultra-strong performance and the exchange rate surged to the 1,340 KRW level for the first time in 13 years since the 2008 global financial crisis, was not significantly different. During this period, foreign investors bought 610 billion KRW, showing net buying as the only investor group. This is unusual considering that foreign investors typically increase selling when the dollar strengthens.

The net buying trend by foreign investors appears to be due to expectations for beneficiaries of the Inflation Reduction Act (IRA) and nuclear power. In fact, among the top 30 stocks with the highest net foreign buying in the second half, 14 stocks?nearly half?belong to the so-called ‘Taejoibangwon’ sectors (solar power, shipbuilding, secondary batteries, defense, and nuclear power). Seungjin Shin, a researcher at Samsung Securities, pointed out that "the foreign investors’ buying is based on the new order momentum in industries where Korea has strengths, such as nuclear power and defense, created by the Inflation Reduction Act."

Securities firms evaluated the improvement in foreign investors’ supply-demand as positive. Dongchan Yeom, a researcher at Korea Investment & Securities, diagnosed that "the inflow of U.S.-based funds despite the weak won and increased stock market volatility is clearly an issue that can be positively evaluated from a supply-demand perspective."

However, there are also opinions that the recent net buying by foreign investors is of a rotational nature. Byungyeon Kim, a researcher at NH Investment & Securities, advised, "Foreigners’ net buying is judged to be cyclical purchases of oversold stocks, and it is difficult to say they are focusing on economically sensitive stocks. It is still necessary to establish sector strategies from a defensive economic perspective."

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