Individual Investors Absorb Foreign Sell-Off... Concerns Over Becoming "Cannon Fodder" Emerge

Foreign Investors Record Nine Straight Days of Large-Scale Net Selling on KOSPI
Individuals Absorb Entire Volume of Foreign Sell Orders
Concerns Mount Over Individual Losses in Event of Market Correction

On the 19th, the KOSPI opened at 7425.66, down 1.20% from the previous trading day, and extended its decline to trade at 7310.64, down 2.73%, as of 10:02 a.m. on the same day. Status board at Hana Bank dealing room, Jung-gu, Seoul on the 19th. Photo by Yonhap News Agency

The KOSPI is showing weakness as large-scale net selling by foreign investors continues. Individual investors are absorbing this foreign selling, raising concerns that those who entered the market late may suffer significant losses in the event of an upcoming market correction.

Foreign Investors Conduct Large-Scale Net Selling on KOSPI for 9 Consecutive Trading Days

On May 19, the KOSPI opened at 7,425.66, down 1.20% from the previous trading day, then widened its decline, trading at 7,310.64, down 2.73% as of 10:02 AM. The KOSDAQ started the session up 0.02% at 1,111.36 but was trading down 2.08% at 1,088.15.

Foreign investors have dragged down the index by continuing large-scale net selling on the KOSPI for nine consecutive trading days. Except for just two trading days in May, foreigners have been net sellers of stocks worth several trillion won every day. From the first trading day of May to the previous day, the amount foreigners have net sold on the KOSPI reached 33 trillion won. As of 10:04 AM on this day, they had already net sold 1.99 trillion won.

It is individual investors who are absorbing this foreign net selling. Individuals have been defending the market by net buying whenever foreigners sell and push the index down. While foreigners net sold 33 trillion won throughout May, individuals net bought the same amount, helping to prevent a further decline in the index. Institutional investors, on the other hand, had similar amounts of buying and selling.

Securities industry experts cite the sharp rise in the KOSPI as the main reason for the foreign sell-off. Among major global stock markets this year, the KOSPI has risen the most, prompting selling for portfolio rebalancing. Kwon Soonho, a researcher at Daishin Securities, explained, "The recent large-scale net selling by foreigners is more about profit-taking and rebalancing demand than an active reduction of positions in Korean stocks."

Past Major Bull Markets Were Driven by Individual Investors

There is also analysis indicating that foreign net selling does not immediately lead to a market downturn. In fact, it is pointed out that major bull markets have repeatedly shown a pattern of foreigners net selling and individuals net buying. Lee Euntaek, a researcher at KB Securities, said, "Since 2000, foreigners have never driven the Korean stock market in the three major bull markets. Rather, bull markets have tended to occur as domestic investors, especially individuals, returned to the stock market."

The inflow of individual investors' funds into stocks is also evident in stock market liquidity indicators. According to the Korea Financial Investment Association, as of May 15, investor deposits stood at 132.8596 trillion won, approaching the all-time high of 137 trillion won. Money Market Funds (MMFs), which collect short-term idle funds, also surged by 12.4 trillion won in March compared to the previous month.

Although the inflow of individual investors' funds has lifted the index, there are concerns that those who entered the market late may suffer losses in the event of a future correction. A securities firm official emphasized, "Since the stock market has always experienced repeated rises and falls, a correction can occur at any time. It is advisable to avoid excessive investments such as leverage and also consider safe assets like bonds."

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