[MarketING] Return of Foreigners? Corporate Earnings Deterioration as an Obstacle

Foreigners Drive Index Up by Concentrated Semiconductor Buying
Net Buying for 3 Consecutive Trading Days

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] Foreign investors have changed. They have maintained a buying streak for three consecutive days recently, and semiconductor-related stocks, which they had been persistently selling, are gradually being accumulated.

Foreign Investors Drive KOSPI Rise for the First Time in a While

On the 4th, the KOSPI closed at 2255.98, up 37.30 points (1.68%) from the previous day. The KOSDAQ also closed at 683.67, up 8.72 points (1.29%), with both indices rising more than 1%.

The rise was led by foreign investors. Foreigners purchased 249.1 billion KRW in the KOSPI market. This marks three consecutive trading days of net buying this year. Although the buying volume was not large in the previous two days, it increased significantly on this day.

Changes are also appearing in the foreign investors' shopping list. Semiconductors, which had been continuously sold off, are now gradually being bought this year. On this day, foreign investors net bought Samsung Electronics shares worth 176.7 billion KRW, making it the most purchased stock. SK Hynix followed with 59.3 billion KRW. Last month, foreign investors were the largest net sellers of Samsung Electronics, offloading 748.8 billion KRW, followed by SK Hynix at 542.9 billion KRW. Meanwhile, foreign investors net sold secondary battery stocks and Apple-related component stocks on this day, reflecting the sharp declines of Tesla and Apple in the New York stock market the previous day.

Kim Seokhwan, a researcher at Mirae Asset Securities, analyzed, "The concentrated buying of semiconductor stocks by foreign investors drove the strong performance," adding, "Expectations for a recovery in the industry were reflected due to the government's expansion of tax credits for semiconductor conglomerates' investments and global investment banks' (IB) forecasts of revisions to Samsung Electronics' semiconductor supply policies."

The day before, Citibank Securities, a foreign securities firm, released a report mentioning the possibility of Samsung Electronics revising its supply policy and the potential for industry improvement, positively influencing investor sentiment.

Choi Yujun, a researcher at Shinhan Investment Corp., said, "Multiple factors were reflected, including the government's increase in tax credit rates for semiconductor facility investments, expectations for IT inventory adjustments due to China's reopening of economic activities, the possibility of Samsung Electronics revising its supply policy amid steep memory price declines, and short-covering inflows ahead of Samsung Electronics' preliminary earnings announcement," adding, "The strong performance on this day was more due to the rebound in specific sectors rather than an overall improvement in risk asset preference."

Upcoming Earnings Shock Poses a Risk

Although the return of foreign investors is anticipated, the upcoming earnings season is expected to be an obstacle to the continuation of their buying momentum. This is because corporate earnings for the fourth quarter of last year have generally deteriorated, and an earnings shock is already anticipated. Lee Kyungmin, a researcher at Daishin Securities, explained, "Foreign investors continued selling despite the won's strength in December last year because the downward revision of earnings forecasts resumed with the start of the pre-earnings season for the fourth quarter," adding, "This led to valuation pressure, stimulating foreign investors' profit-taking sentiment."

The recently rising trend in the won-dollar exchange rate is also a variable. On this day, the won-dollar exchange rate closed at 1271.7 won, up 0.7 won from the previous day in the Seoul foreign exchange market. The opening price rose more than 9 won from the previous session, surpassing 1280 won, but the increase narrowed during the day due to the inflow of foreign buying and synchronization with the offshore yuan's strength. On the 3rd (local time), the dollar index, which shows the dollar's value against six major currencies, rose more than 1% from the previous trading day amid recession concerns. As recession fears persist, this could influence dollar strength. The researcher predicted, "Due to increased recession concerns, the difference in interest rate hike speeds between the U.S. and Korea, global trade sluggishness, and weakening Korean export momentum, a rebound toward the 1400 won level is expected in the first quarter of this year."

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