'Shh!' KOSPI Hits Bottomless Lows, Some Are Picking Up... "Historic Low, Foreigners' Longest Net Buying Streak This Year"

[Asia Economy Reporter Lee Seon-ae] Amid growing concerns about a 'further decline warning' for the KOSPI, overseas institutional investors who emphasize a long-term perspective have been steadily buying domestic stocks with increased valuation appeal. This indicates that despite the continuous downward pressure on the KOSPI making further declines inevitable, the current level is practically a historical low, demonstrating high price attractiveness. It leads to the conclusion that these investors are approaching the domestic stock market with a long-term investment strategy and a 'staggered buying' perspective. The fact that foreigners have recently set the longest KOSPI net buying streak this year is also interpreted as a result of this.

Someone Is Picking Up

According to the financial investment industry on the 19th, Norway and Singapore have continued their net buying streak of domestic stocks since May. Singapore, home to sovereign wealth funds such as GIC and Temasek, purchased 477 billion KRW worth of Korean stocks in June and increased the net buying scale to 1.782 trillion KRW in September.

Kim Hoo-jung, a researcher at Yuanta Securities, said, "In September, countries that net bought Korean stocks included not only Singapore but also Norway and Japan," adding, "Norway's sovereign wealth fund and pension funds, which have a long-term investment nature, have significant influence." He further noted, "Due to the weak Korean won and the stock market decline, foreign investors with a strong long-term investment nature seem to be increasing their purchases of Korean stocks."

Data also showed that European equity funds and exchange-traded funds (ETFs) turned to net buying for the first time in February, which implies that bargain hunting is taking place. Researcher Kim said, "Although U.S. equity funds and ETFs saw a net outflow of $10.31 billion in the last week of September, they switched to a net inflow of $3.26 billion in the first week of October," concluding, "As the stock market continues to decline, bargain buying appears to be flowing in."

The securities industry diagnosed this trend as indicating that the domestic stock market is at a historical low and severely undervalued. The KOSPI's 12-month forward price-to-book ratio (PBR), which was around 1.18 times at the beginning of the year, has dropped to about 0.86 times. Based on data since 2006, this is at the bottom 1.93% level. The period during which the PBR was below the current level accounted for only about 1.93% of the entire timeframe.

K-Stock Bargain Sale

It is virtually a 'bargain sale of K-stocks.' Foreigners' actions reinforce this meaning. Foreign investors recorded 12 consecutive trading days of net buying from the 29th of last month until the day before, marking the longest net buying streak this year. This is two days longer than the previous longest streaks of nine consecutive trading days in August (August 16?26) and July (July 28?August 9). The total net buying amount during this longest period reached 2.191356 trillion KRW.

On a dollar-converted basis, the KOSPI reached its peak of 2,225 in June 2021 and has fallen 48% from the peak in one year and four months. The dollar-converted KOSPI now stands at 1,174, below the 1,200 mark. Shin Jungho, head of investment strategy at Ebest Investment & Securities, said, "Since 2010, the key entry level for foreigners in the KOSPI has been 1,200 (dollar-converted index, equivalent to 2,300 KOSPI points), but this level has been broken," adding, "After breaking 1,200, foreign investor sentiment switched to buying, and at the current level, the price attractiveness of Korean stocks is sufficient, reducing downward pressure."

However, many voices caution against further declines. Labor Gil, a researcher at Shinhan Financial Investment, said, "The KOSPI volatility index has not yet passed its peak," adding, "Considering the foreign investors' net selling capacity, the KOSPI still has room for further technical declines." Lee Kyung-min, a researcher at Daishin Securities, also emphasized, "We need to be cautious about the possibility of further declines due to fundamental variables such as economic recession and earnings slowdown."

Son Juseop, a researcher at Cape Investment & Securities, said, "Among KOSPI 200 companies, about 10% or 20 companies show the lowest PBR levels since 2006," warning, "These companies either lack past data to estimate the bottom due to recent listings or have already broken below previous bottoms, so caution is needed beyond undervaluation."

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