[Good Morning Stock Market] Foreigners Packing Up in Korean Stock Market vs Institutional Investors Targeting Dividends

Last Week's US Stock Market Shows Limited Movement Amid Recession Concerns
Institutional Investors Focused on Dividends
Foreigners' Net Selling Expected to Intensify

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] With only four trading days left until the stock market closes this year, it seems unlikely that the market sentiment will reverse sharply. Although institutional investors continue to engage in net buying to receive dividends, concerns over an economic recession are causing foreign investors to increase their net selling, which is acting as a burden.

Sangyoung Seo, Researcher at Mirae Asset Securities: “Focus on Institutional Investor Supply and Demand Amid Recession Concerns”

Last Friday, the U.S. stock market showed limited movement despite news of stabilizing inflation, reflecting concerns about a recession. The November Personal Consumption Expenditures (PCE) report showed personal consumption increased by only 0.1% compared to the previous month (previous month was 0.9%), further heightening economic worries. The savings rate also rose from 2.2% to 2.4%, confirming that U.S. consumers are reducing their spending.

Concerns about a recession are negative for the domestic stock market. As U.S. consumer spending decreases, South Korea’s exports to the U.S. are likely to decline. Additionally, last week’s poor earnings report from Micron has raised fears that the semiconductor industry outlook will worsen further.

However, there are some positive supply and demand factors in the market. Institutional investors may significantly increase buying to receive dividends. Furthermore, the Ministry of Economy and Finance’s decision to abolish the enforcement decree that aggregated family shares, including spouses, for major shareholder taxation could reduce selling pressure from individual investors, which is also positive.

Kyungmin Lee, Researcher at Daishin Securities: “Quiet Year-End... Foreign Investors’ Profit-Taking Sentiment Will Strengthen”

Foreign investors’ profit-taking sentiment is strengthening. Since foreign investors’ supply and demand have a significant impact on the index, it is necessary to focus on their trading patterns. Despite the won-dollar exchange rate showing a downward trend last month, foreign selling has continued. Foreign investors have been net sellers for five consecutive trading days last week, with a cumulative amount reaching 303 billion KRW. Although institutional investors engaged in net buying worth about 1 trillion KRW, the KOSPI fell more than 1.9% due to foreign investors’ supply and demand influence.

As the Q4 pre-earnings season begins and companies resume downward revisions of earnings forecasts, foreign net selling is intensifying. By sector, net selling was concentrated in semiconductors, automobiles, telecommunications, chemicals, and IT home appliances. The combination of profit-taking desires and concerns about industry conditions and economic instability is estimated to have increased selling in these sectors. As the full earnings season unfolds, further downward revisions of profit forecasts are expected. In an unfavorable global stock market investment environment, foreign investors may prefer to secure some profits at the beginning of the year before starting the new year.

Additionally, besides foreign supply and demand, there is another aspect to be cautious about at the beginning of the year: the building of short-selling positions. As short selling, which had decreased at year-end, increases, program buying is likely to turn into selling. If short-selling balances increase during a foreign selling-dominant phase at the start of the year, it is expected to trigger supply and demand anxiety among investors. In conclusion, it is necessary to reduce stock exposure at year-end and the beginning of the year.

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