Foreigners' Preference for KOSPI... Sold Off KOSDAQ

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Foreign investors were the only group to show net buying in the KOSPI market during October. However, they exhibited net selling in the KOSDAQ market during the same period.

According to the Korea Exchange on the 5th, foreign investors purchased a total of 3.053 trillion KRW worth of stocks in the domestic market throughout October. In contrast, individual investors and institutional investors recorded net sales of 2.61 trillion KRW and 635 billion KRW respectively, highlighting a notable 'buying trend' by foreigners.

However, foreign investors mainly focused on KOSPI-listed stocks. During this period, they bought 3.31 trillion KRW worth of shares in the KOSPI market alone. Out of 19 trading days last month, they purchased stocks on 17 days, excluding only two days. Foreign investors maintained a net buying streak for 11 consecutive trading days. Conversely, in the KOSDAQ market, foreign investors sold stocks on 10 out of 19 trading days, showing an opposite trend to the KOSPI market.

The preference for large-cap stocks was also evident in the list of top net purchased stocks. All top 10 net purchased stocks by foreign investors last month were large-cap KOSPI stocks. Samsung Electronics ranked first in net purchases, followed by Samsung SDI. Other large-cap KOSPI stocks such as SK Hynix (3rd), LG Energy Solution (4th), and POSCO Chemical (6th) also occupied many of the top net purchase positions.

On the other hand, foreign investors sold 257.7 billion KRW worth of KOSDAQ stocks, resulting in net selling. Among the top net purchased stocks by foreigners, only a few were KOSDAQ-listed companies, including L&F (12th), a secondary battery material specialist, as well as EcoPro BM (28th) and Chunbo (44th).

The securities industry interprets this large-cap preference as a result of automated algorithmic trading. Kyun Jeon, a researcher at Samsung Securities, explained, "During the process of purchasing Korean stocks in basket units, buying was concentrated on the top market capitalization stocks," adding, "Foreign stock trading is presumed to follow an algorithmic pattern that mechanically allocates funds flowing into emerging market (EM) ETFs or Korea-related funds over several days."

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