[MarketING] Stock Market Reacting Volatilely to Foreign Investors

KOSPI Closes Slightly Lower
Index Fluctuates Amid Recent Foreign Investor Movements

The KOSPI and KOSDAQ indices turned bearish again after just one day. The direction of the indices appears to be determined by foreign investors' supply and demand. Foreign investors, who had maintained a buying trend, recently showed a selling dominance, drawing market attention to the direction of foreign investors' supply and demand.

KOSPI Ends Slightly Lower

On the 27th, the KOSPI closed at 2,581.39, down 0.81 points (0.03%) from the previous day. The KOSDAQ ended the session at 874.14, down 5.36 points (0.61%).

[Image source=Yonhap News]

Foreign selling pressure pulled the indices down. On that day, foreign investors net sold 108.1 billion KRW in the KOSPI market and 222.3 billion KRW in the KOSDAQ market. Toward the end of the session, institutional investors turned to buying in the KOSPI market, narrowing the decline. Institutions bought 16 billion KRW in the KOSPI market but sold 51.7 billion KRW in the KOSDAQ market. Individual investors net bought 60.2 billion KRW and 288.8 billion KRW in the two markets, respectively.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "In the KOSPI market, the transportation equipment and utilities sectors showed a strong trend as foreign and institutional investors simultaneously net bought," adding, "In the KOSDAQ, foreign investors concentrated their net selling on large-cap stocks such as secondary batteries and healthcare, which widened the decline."

Looking at the top five stocks by net buying from foreign and institutional investors on that day, foreign investors bought Samsung Electronics the most, with net purchases of 164.4 billion KRW, followed by Hyundai Motor (54.2 billion KRW), Hyundai Mobis (23.7 billion KRW), Korea Electric Power Corporation (KEPCO) (17.4 billion KRW), and Kia (17.1 billion KRW). Institutions bought POSCO Holdings (25.2 billion KRW), KEPCO (23.2 billion KRW), Hyundai Mobis (20.9 billion KRW), Hyundai Motor (19.5 billion KRW), and LG Innotek (13.4 billion KRW). Both foreign and institutional investors focused their buying on Hyundai Motor, Hyundai Mobis, and KEPCO. Supported by this, Hyundai Motor rose 2.74%, Hyundai Mobis 4.07%, and KEPCO 4.72%. In the case of Hyundai Motor and Hyundai Mobis, the positive impact seems to stem from Hyundai Mobis unveiling its future strategy for vehicle displays and surpassing its competitor, Japan's Aisin, to rank among the global top 5 automotive parts companies. KEPCO's strength reflected expectations of resolving negative margins after last month's wholesale electricity price (SMP) fell below the electricity tariff.

Market Reacts to Foreign Investors' Movements

The market is showing volatility depending on foreign investors' supply and demand. The previous day, the index rose as foreign investors bought, but it fell on this day as they turned to selling. The buying momentum of foreign investors, which had driven the index's rise, has recently slowed, increasing market interest in the direction of foreign investors' supply and demand.

Last week, foreign investors net sold about 1.1 trillion KRW worth of stocks in the KOSPI market. This marks a change in foreign investors' supply and demand direction after 11 weeks. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "Opinions are divided on whether the foreign selling is temporary or a trend," adding, "Since there is no clear reason for foreign investors to significantly reduce their stock holdings, I believe the former is more likely."

Given that corporate profits continue to recover, there is no strong reason for foreign investors to sell. Kim explained, "Although there is no significant improvement in second-quarter earnings, the 12-month forward earnings per share (EPS), including second-half profits, continues to rebound, indicating a recovery in earnings that determines the stock price direction," adding, "Without a sharp downward revision in earnings, there is no reason for foreign investors to net sell stocks."

The recent slowdown in foreign buying is attributed to exchange rate factors. Kim said, "Following the June Federal Open Market Committee (FOMC) meeting, concerns about further interest rate hikes increased, causing the Korean won to weaken against the US dollar," adding, "Fed Chair Jerome Powell's hawkish remarks also influenced the upward movement of the exchange rate. Foreign investors sensitive to exchange rate losses may sell some stocks in this environment." Before the June FOMC, the won-dollar exchange rate had fallen to the 1,270 KRW level but has since been rising, recently surpassing 1,300 KRW again.

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