Foreign Investors Return in September With "Buy Korea"... SK Hynix Sees 1.6 Trillion Won Full-Buying Spree

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Foreign investors, who were at the center of the KOSPI's "honeymoon rally," have once again chanted "Buy Korea," setting a new milestone in the domestic stock market. Having poured nearly 3 trillion won into the main board this month alone, they have placed the majority of their bets on the two leading K-semiconductor stocks, signaling a potential second rally for the KOSPI.

According to the Korea Exchange on September 11, the KOSPI closed at 3,314.53 the previous day, up 1.67%. This surpassed the previous all-time closing high of 3,305.21 set on July 6, 2021, breaking the record after more than four years. At one point during the session, it soared to 3,317.77, surpassing the previous intraday high of 3,316.08 recorded on June 25, 2021. The total market capitalization also reached an all-time high of 2,727 trillion won.

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Foreign investors, who led the honeymoon rally following the launch of the new government in June, have once again taken the lead. From September 1 to 10, foreign investors recorded a net purchase of 2.9336 trillion won in the KOSPI. When including volumes from the alternative trading system (ATS) Nextrade, the figure approaches 3.1 trillion won. During the same period, net purchases in the KOSDAQ also increased from 145.9 billion won to 246.3 billion won.

Previously, foreign investors sold off 1.65 trillion won in the KOSPI last month due to fatigue from a short-term surge and disappointment over the proposed tax reforms. However, factors that had fueled market concerns-such as the policy rate cut and the withdrawal of plans to strengthen the major shareholder transfer tax-have gradually been resolved, leading to a return to net buying. Lee Jaewon, a researcher at Shinhan Investment & Securities, analyzed, "The disappointment over the tax reform bill, which was a factor in August's sideways market, has shifted to expectations that the current transfer tax threshold (50 billion won) will be maintained, attracting foreign capital."

Above all, the most welcome aspect of the return of foreign investors is that their buying momentum is reviving in the large-cap stocks that drive the index. A prime example is that SK Hynix and Samsung Electronics, the two pillars of the KOSPI, have ranked first and second, respectively, in net foreign purchases this month. This contrasts with July, when foreign investors selectively bought more than 3.6 trillion won of Samsung Electronics while selling 193 billion won of SK Hynix.

SK Hynix, in particular, has been the main beneficiary of increased foreign investment. So far this month, foreign investors have bet about 1.6582 trillion won on SK Hynix, leading the charge to reclaim the "300,000-won Hynix" level. Chae Minsook, a researcher at Korea Investment & Securities, stated, "With shipments of high-bandwidth memory (HBM) projected to increase by 45% year-on-year in 2026 and the average selling price (ASP) expected to fall by 8%, SK Hynix, which has a high market share with Nvidia, is likely to benefit the most," raising the target price to 410,000 won.

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Semiconductors are not the only sector attracting foreign attention. They have also reaffirmed their interest in defense industry leaders Hanwha Aerospace and Hyundai Rotem, purchasing 286.8 billion won (third in net purchases) and 183 billion won (fourth in net purchases), respectively, as they did in the first half of the year. HD Hyundai Electric, which has recently secured a series of ultra-high-voltage transformer export contracts worth hundreds of billions of won in the European market, followed with 160.7 billion won (fifth in net purchases).

With the government's commitment to revitalizing the capital market coming to the fore again, some analysts believe that a further rally could be expected if domestic and external uncertainties ease. Lee Kyungsoo, a researcher at Hana Securities, said, "Recently, active government intervention and policy support have become common in global capital markets. If the Korean government follows this trend, it would be highly positive for enhancing the competitiveness of the domestic capital market," adding, "If the maximum dividend income tax rate (25%) is lowered, a full-fledged resolution of the discount could be possible."

However, concerns over a potential U.S. economic recession remain a variable. Seo Sangyoung, a researcher at Mirae Asset Securities, cautioned, "Depending on whether the Federal Open Market Committee's (FOMC) expected rate cut is an 'insurance cut' or a cut reflecting an economic downturn, market volatility could increase," urging attention to upcoming real economy indicators such as the U.S. Consumer Price Index (CPI) and retail sales.

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