Foreign Investment Falters
The KOSPI closed at 2,096.77 points on May 12, losing 0.61 points from the previous session. Institutional investors recorded a net sale of 89.4 billion won (US$81.3 million) that day, although the index reached as high as 2,101.72 points during the trading session. Foreign investors recorded a net purchase of 4.9 billion won (US$4.46 million), while the net purchase of individual investors amounted to 74.5 billion won (US$67.8 million). The KOSDAQ lost 5.55 points to close at 686.74.
“External variables such as the Greek risk, concerns over the macroeconomic indices of the U.S. economy, and the valuation burden have affected foreign investors since last month,” Samsung Securities explained, continuing, “Under the circumstances, large caps with high valuations are taking a hit.” Mirae Asset Securities added that most of the funds flowing into Korea these days are for investment diversification rather than investment driven by economic fundamentals.
It is individual investors that are leading investment in the market nowadays. With the interest rate remaining low, floating funds worth over 800 trillion won (US$727 billion) are rushing to the stock exchange. Expectations for earnings for the second quarter are attracting the money, too.
Nonetheless, experts point out that external variables should be addressed first for the index to go beyond 2,100 points. “Although Korean companies are expected to come up with improved performances, export increases and external stability are essential for a rally,” Samsung Securities remarked, adding, “A breakthrough in the form of an additional interest rate cut or the like will be helpful as well.”