In big switch, foreign investors buy as Korean individuals sell

Finance

Published: 30 Jan. 2023, 17:43 Updated: 30 Jan. 2023, 19:56

In big switch, foreign investors buy as Korean individuals sell

Electronic display boards at Hana Bank in central Seoul show Monday’s Kospi index and foreign exchange rate. [NEWS1]

Foreign investors are buying heavily in the Korean market just as retail investors are dumping.

It’s a big reversal.

Retail investors net sold almost 6 trillion won ($4.89 billion) of Kospi constituent stocks this month, compared to a net purchase of 5.65 trillion won in the same month a year earlier.

Despite the selloff, the Kospi jumped from heavy buying by foreign investors.

The benchmark is up 10.1 percent from the beginning of the year.

Foreign investors net purchased 6.94 trillion won in Kospi stocks so far this month through Monday. They continued net buying throughout the month except for on Jan. 10, when 2.2 billion won of shares were unloaded.

Popular stocks added to their portfolios included Samsung Electronics, in which 2.64 trillion won’s worth was net purchased, and SK hynix, with 659.71 billion won worth scooped up. These companies were followed by Shinhan Financial Group (263.65 billion won) and Hana Financial Group (229.95 billion won). EV battery companies, like LG Chem and Samsung SDI, also made it onto the list of stocks heavily purchased.

“Foreign investors are intensively buying Korean stocks on expectations that the central bank will complete its rate increases and on the weakening of dollar, which raised the preference of non-U.S. assets,” said Lee Young-hoon, a researcher at Samsung Securities.

“DRAM prices are forecast to recover in the second half of the year as chip inventories become exhausted in the first half,” said Seo Sang-young, head of the media content department at Mirae Asset Securities. “Their intention is to buy the stocks when their prices are at the bottom since the chip sector is a proxy that is sensitive to the economy.”

The price of Samsung Electronics jumped 14.1 percent this month, while SK hynix rose 19.8 percent.

The weakening of dollar on expectation of China’s economic stimulus is also raising the attractiveness of the Korean assets.

The won traded at 1,227.4 to the dollar when the market closed on Monday, up 3.6 percent from the beginning of the year.

“Expectations about China’s economic recovery strengthened the yuan, which resulted in a strengthened won,” said Lee Jae-man, a researcher at Hana Securities.

Retail investors net sold 5.96 trillion won this month through Monday. The most sold stock was Samsung Electronics, which was followed by SK hynix, Shinhan Financial Group and Kia.

They bought more than 5 trillion won in bonds this month through last Friday, which is 67.9 percent more than the same period last year.

“There was hardly a temptation to invest in bonds since annual yield was around 1 percent,” said Park So-yeon, a researcher at Shinyoung Securities. “But the number of corporate bonds offering annual yield between 3 to 6 percent has now increased.”

The yield for AA- corporate bonds was 4.350 percent on Monday, up from 2.768 a year earlier.

BY KIM GYEONG-JIN, JIN MIN-JI [jin.minji@joongang.co.kr]