Semiconductors Ahead of FOMC: Foreigners Sell, Individuals Buy

Expectations of High-Intensity Tightening and Continued Strong Dollar
Foreign Investors Move Funds to Safe Assets
Individuals Engage in Bottom Buying and Averaging Down

On the 20th, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. On that day, the KOSPI index opened at 2373.64, up 17.98 points (0.76%) from the previous trading day. The won-dollar exchange rate opened at 1390.0, down 3.6 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Hwang Junho] Ahead of the Federal Open Market Committee (FOMC) meeting on the 21st, which is expected to announce high-intensity tightening from a Giant Step (0.75% base rate hike) to an Ultra Step (1.0%), the choices of various market participants diverged. Foreign investors sold the unchanging blue-chip stock ‘Samsung Electronics’ and the third-largest market cap SK Hynix, while individual investors waited for the FOMC by engaging in bottom-fishing or dollar-cost averaging.

According to the Korea Exchange on the 21st, foreign investors sold the most Samsung Electronics (KRW 335 billion) and SK Hynix (KRW 225 billion) during the past week (13th?20th). As the US high-intensity tightening policy is expected to continue and the dollar surged, it is analyzed that foreign investors withdrew funds to redirect capital flows toward safe assets such as the dollar. Typically, when the exchange rate rises, buying pressure on domestic stocks should strengthen, but if concerns about economic slowdown increase, funds tend to flow out of riskier emerging markets.

According to the Korea Financial Investment Association, as of the previous day, the foreign ownership ratio of the KOSPI market capitalization was 30.39%, the lowest level in 13 years and 2 months since July 27, 2009 (30.37%). This resulted from net selling of KRW 1.6069 trillion in the KOSPI between the 1st and 20th of this month.

Cho Chang-min, a researcher at Yuanta Securities, said, "Uncertain macro environment and concerns about economic slowdown are affecting the stock market decline," adding, "Even foreign investors, who had consistently recorded net purchases despite the high exchange rate trend, have shifted to net selling since September."

On the other hand, individual investors are approaching from a different perspective. Waiting for a rebound opportunity, they engaged in ‘bottom-fishing’ or ‘dollar-cost averaging.’ During the same period, individuals focused on buying Samsung Electronics (KRW 26.9 billion) and SK Hynix (KRW 12.9 billion). Despite foreign capital withdrawal and semiconductor demand slowdown due to recession concerns pushing stock prices downward, individuals are steadily buying stocks to lower their average purchase price. As of 9:38 AM on the day, Samsung Electronics fell to KRW 55,300 per share, marking a new 52-week low again. SK Hynix also recorded KRW 87,000, approaching its closing price 52-week low (KRW 85,600) once again.

In the securities industry, there is cautious speculation that the bottom may be reached between the third and fourth quarters of this year. Lee Eun-taek, a researcher at KB Securities, said, "Recently, SK Hynix’s earnings estimates have been significantly revised downward, and the consensus operating profit margin for the fourth quarter has dropped to about 10%, but semiconductor stock prices have never formed a bottom without such a process," adding, "The semiconductor downturn has started heading toward a climax, and usually after this process, the bottom appears. I believe early next year will be that time."

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