Investors shift to selling mode

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Investors shift to selling mode

The Korean stock market rode a wave of highs in March, but April may turn out to be the cruelest month as foreign investors who went on a buying spree last month are starting to opt for profit taking.

Foreign investors bought 3.29 trillion won ($2.88 billion) worth of stocks in March, the Financial Supervisory Service, the country’s financial regulator, said in a report on Monday, continuing a buying spree that began last December. They now hold 528.8 trillion won in the local market as of the end of last month, a 5 percent increase from the previous month and an all-time high.

Foreign holdings accounted for 32.4 percent of all shares.

“Investors from the United States continued to invest in the local stock market, while those from Europe and the Middle East offloaded last month,” said Choi Gwang-sik, a director at the service. “Foreign investors continued to buy local stocks starting from December, and they were mostly interested in blue-chip stocks.”

Foreign investors bought 3.2 trillion won in shares on the benchmark index, the Kospi, and 100 billion won in the secondary Kosdaq index last month. Stocks owned by U.S. citizens recorded 220.8 trillion won in March, accounting for 41.8 percent of all shares owned by foreigners. That was followed by Europeans with 150.2 trillion won and Asian investors with 64.8 trillion won.

Even though foreign investors continued their buying spree for a fourth straight month in March, they have begun offloading their shares this month.

Foreign investors sold 300 billion won worth of stocks last week, according to the Korea Exchange, the local markets’ operator.

“One of the biggest changes in the Kopsi market this month is foreign investors shifting to a selling spree,” said Song Seung-yeon, an analyst at Korea Investment & Securities. “It appears they have changed tune not because of domestic issues but due to global issues like foreign exchange.”

Korea’s currency strengthened from 1,200 won per dollar to 1,100 last month. The U.S. dollar slipped after rising at a fast rate earlier this year, and the weaker greenback sent foreigners packing into emerging markets like Korea.

Last week, though, the Korean currency weakened by more than 20 won against the dollar and led many investors to go for profit taking.

“Geopolitical risks are one of the key factors when it comes to local stock markets,” said Song at Korea Investment & Securities. “Foreign investors have become less sensitive about risks coming from North Korea as they have already had past experience with Pyongyang’s nuclear tests and attacks on Korean warships.

“However, the Trump administration has been taking tough stances against North Korea,” the analyst cautioned, “and this might lead to the further uncertainties after the U.S. attack against Syria last week.”

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