Foreign net selling of KOSPI stocks hit record high in May
Seoul, May 31
Foreign selling of South Korean stocks listed on the benchmark Korea Composite Stock Price Index reached a record high in May, while foreign investors poured a record amount into the tech-heavy KOSDAQ market, data showed on Sunday.
Offshore investors sold a net 44.71 trillion won (US$29.66 billion) worth of local stocks in May, surpassing the previous record of 35.74 trillion won in net selling set in March, according to data from the Korea Exchange (KRX), reports Yonhap news agency.
Foreign investors remained net sellers for 16 consecutive trading sessions from May 7 to May 29, marking the longest selling streak since February 2009, when they sold stocks for 17 straight trading days in the aftermath of the 2008 global financial crisis.
In contrast, retail investors purchased a net 36.09 trillion won worth of stocks, setting a record for monthly net buying.
Market watchers attributed the foreign sell-off largely to profit-taking following a tech rally, led by chipmakers Samsung Electronics Co. and SK hynix Inc.
Meanwhile, foreign investors bought a net 2.8 trillion won worth of shares on the secondary KOSDAQ market this month, exceeding the previous record of 2.7 trillion won in net buying set in July 2023.
Market observers said the strong inflow into KOSDAQ stocks was partly driven by expectations surrounding a newly launched investment fund that offers tax benefits and loss protection, which became available through local banks and securities firms earlier this month.
The fund, under the Korea National Growth Fund, aims to invest in companies specialising in artificial intelligence, rechargeable batteries, hydrogen, biotechnology and other related sectors.
Even as the benchmark Korea Composite Stock Price Index (KOSPI) continued its record-breaking rally toward the unprecedented 9,000-point mark, rising volatility is fuelling concerns that gains were increasingly concentrated in a handful of heavyweight stocks, bourse data showed Friday.
The KOSPI 200 volatility index, or VKOSPI, closed at 74.26, up 3.72 per cent from the previous session, according to data from the Korea Exchange. The KOSPI climbed 3.55 percent to finish at a record high of 8,476.15.
— IANS
Reader Comments
As someone who follows global markets, this feels like a warning for emerging economies. When foreign investors pull out $30 billion in one month, it shows how volatile their confidence is. But India's domestic mutual fund inflows have been strong too - we're not as dependent on FIIs anymore. Still, need to watch chip sector trends closely.
Classic risk-off move by foreigners. Korean market is heavily dominated by Samsung and Hynix - when those stocks run up, everyone takes profits. But the tax-benefit fund for AI and batteries is smart policy. India should replicate this for our semiconductor push under PLI. For now, KOSPI at 8476 still looks expensive on PE basis.
Honestly, this is why retail investors should be careful following foreign flows blindly. When smart money sells, it can create panic. But Indian retail is getting smarter - we saw similar patterns during COVID but our markets recovered strongly. That said, the KOSDAQ fund with loss protection sounds like a good safety net for small investors. Good strategy from Korea! 👏
Another example of how concentrated markets are risky. When just two stocks (Samsung and Hynix) drive most gains, any profit booking can cause major volatility. India's Nifty is more diversified, but we have similar issues with HDFC Bank and Reliance. At least Korean retail stepped in with record buying - shows local confidence despite foreign jitters.
Interesting how the KOSDAQ fund with tax benefits attracted such heavy inflows. It shows that even in developed markets, government policy can steer retail money toward
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