Unquenchable appetite for local stocks from afar

Foreign investors’ net buying of local stocks will likely reach a new monthly high in August thanks to their strong appetite for equities here, the financial regulator said yesterday.

Foreigners scooped up a net 5.7 trillion won ($5.04 billion) of local shares as of Aug. 27, continuing their buying streak since the end of July, according to the Financial Supervisory Service (FSS).

With three more sessions remaining this month, the figure will likely surpass the previous monthly record of 6.21 trillion won tallied in January, the FSS said.

Foreign investors started to snap up local shares after the European Central Bank President Mario Draghi said a month ago that the bank will “do whatever is necessary” to protect the euro, along with political support from the leaders of Germany, Spain and Italy.

Since the remark, foreign investors bought a net $6.04 billion of local stocks until Aug. 22, with their holdings reaching more than 34 percent of the total shares on the main bourse, the watchdog said.

Some market watchers said foreign investors may have scooped up Korean stocks as they anticipated Moody’s raising the country’s sovereign credit rating.

“Foreign investors may have expected the upgrade and thus made huge investments in advance,” said Lee Jong-woo, an analyst at I’m Investment & Securities.

Moody’s on Monday raised its sovereign rating on Korea by one notch to “Aa3,” citing the country’s strong fiscal fundamentals, higher economic resilience and competitiveness.

Financial authorities expect the rating upgrade will spur an increased inflow of foreign investment funds, but analysts said foreign stock buying may lose steam in light of their protracted buying spree.

“Given foreigners’ strong net buying in August, the new rating is unlikely to attract further investment from overseas down the road,” said Cho Yong-hyun, an analyst at Hana Daetoo Securities.

Yonhap