Foreign investors offload over 7 trillion won of Korean stocks in Q1

Finance

Published: 04 Apr. 2022, 16:43 Updated: 04 Apr. 2022, 19:14

Foreign investors offload over 7 trillion won of Korean stocks in Q1

A banker watches news on the Russia-Ukraine war at a bank in central Seoul on March 31. [YONHAP]

Foreign investors net sold more than 7 trillion won ($5.6 billion) of Korean stocks in the first quarter.

LG Energy Solution, with its record-setting initial public offering that went public in January, was the most sold stock by foreign investors in January through March.

As the market continues to stay sluggish this year, analysts have lowered their projections on the Kospi in an indication that it may be difficult for the benchmark index to once again reach 3,000 points within the year.

Foreign investors net sold 7.57 trillion won Korean stocks in the first quarter. They net sold 5.5 trillion won Kospi stocks, and 1.8 trillion won of secondary Kosdaq stocks.

The total market capitalization for Kospi stocks owned by foreign investors was down to 31.61 percent as of last month, the lowest since 31.54 percent recorded in January 2016.

They net sold 2.95 trillion won of battery maker LG Energy Solution's shares from January through March, more than half the total of Kospi stocks they unloaded in the same period.

Foreign investors sold 1.8 trillion won of LG Energy Solution stocks for a week from Jan. 27, a day after it went public, through Feb. 3. They net sold 996.2 billion won for another week after the company’s one-month lockup period ended on Feb. 28.

Samsung Electronics followed with 1.02 trillion won of sell-off, followed by Kakao with 966.7 billion won, Naver with 957 billion won, Hyundai Motor with 859.8 billion won and Samsung SDI with 852.8 billion won.

They net purchased SK hynix (1.18 trillion won), LG Chem (913.3 billion won) and Hyundai Glovis (672.1 billion won) in the same period.

A primary reason behind the massive sell-off is growing market volatility.

Prices of raw materials and oil have soared since the onset of the Russia-Ukraine war, negatively impacting the Korean economy heavily reliant on exports. The Fed’s projected aggressive rate hikes and the weakened won against the dollar are also encouraging foreign investors to leave the Korean market.

West Texas Intermediate crude futures spiked to $130.5 per barrel on March 6, the highest since July 2008. It shed more than 20 percent to dip below $100 in the same month. The average monthly West Texas Intermediate crude oil price was $62.33 in March 2021 and $29.21 in March 2020, according to Statista. They are below more than 100 percent and 300 percent from last month's peak.

Korean won against the dollar recently reached a peak of 1,242.8 won on March 15. It was the first time it surpassed 1,240 won per dollar since May 2020. It was 1,214.4 won per dollar on Monday.

“If the won-dollar currency rises above 1,200 won per dollar, foreign investors convert direction to net sell-off,” said Le Jae-man, a researcher at Hana Securities.

Brokerages lowered projections for Kospi following foreign investors’ major sell-off.

Daishin Securities projected Kospi to stay in a range of 2,500 points to 3,180 points, while Yuanta Securities projected a range of 2,550 points to 3,150 points. KB Securities, cut the projection by 10 percent to 3,250 points from the previous 3,600 points.

BY JIN MIN-JI, LEE TAE-YUN [jin.minji@joongang.co.kr]