Foreign investors fueling Kospi
After a sluggish January, the Korean benchmark Kospi index has gained nearly 70 points this month alone. The index hovered around the 1,360 mark in late January, but finished yesterday at 1,428.58.Behind the rise has been a buying spree by foreign investors. From Jan. 31 to yesterday, they purchased a net 780 billion won ($836 million) of shares. It marked the first time that foreigners were net purchasers for five straight trading sessions since last March.
Foreign investors were net sellers of nearly 18 trillion won from October 2004 to November 2006. The market opened to foreigners in 1998, so they have already bought most major shares, and higher market prices discouraged them from buying more of what they already had.
The tide turned in December last year, when foreigners’ net purchases totaled more than 1 trillion won.
“Aside from their buying spree, what’s significant is that foreigners are no longer overlooking the Korean market and are instead keeping it on their radar,” said Kim Hak-gyun, senior analyst with Korea Investment and Securities Co.
Foreign investors were big buyers in several international markets, including the Republic of South Africa, Taiwan, and Thailand. And Korea was also the beneficiary.
Why the sudden change? Oh Hyun-seok, head of the investment information team at Samsung Securities Co., said Korea has emerged as a viable alternative for foreign investors wary of a crash in other markets.
“The possibility of sudden drops in China and India has been growing, and semi-advanced markets such as Korea and Taiwan are now considered pretty good options for investors,” Mr. Oh said. He predicts the Kospi, fueled by foreign buying, may reach 1,500 points in the first quarter of 2007.
Others are less optimistic. Kim Young-ik, head of research at Daehan Investment and Securities Co., is concerned that foreign investors here may try to turn a quick profit and take flight as soon as they realize their goal.
If they do, Mr. Kim said, “the Kospi could nosedive to below 1,300 points.”
The performance of Chinese and Indian markets is key. The sharp decline of Indian stocks in May of last year dragged down other emerging markets. Should China or India suffer a hard landing this year, the Korean market will also be adversely affected, experts say.
By Pyo Jae-yong JoongAng Ilbo jeeho@joongang.co.kr
with the Korea JoongAng Daily
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