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Foreigners’ Market Capitalization Ratio Hits Seven-Year Low
Foreign Capitalization
Foreigners’ Market Capitalization Ratio Hits Seven-Year Low
  • By Michael Herh
  • January 26, 2016, 06:00
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Foreigners’ capitalization in the Korean stock market fell to account for 28.55 percent of the total market value as of January 25.
Foreigners’ capitalization in the Korean stock market fell to account for 28.55 percent of the total market value as of January 25.

 

Foreigners’ market capitalization ratio fell to a seven-year low at the Korean stock market. As foreigners steadily sold off Korean stocks for nearly two months, breaking the lowest record set due to massive selling in September last year. 

According to Koscom, the total market capitalization of foreigners’ stocks at the KOSPI and the KOSDAQ market stood at 399,844.7 billion won as of January 25. This figure accounts for 28.55 percent of the total market value (1,400,328.5 billion won).

Foreigners’ portion has been on skids since it fell below 29 percent on January 4, the first trading day of the New Year. This percentage is lower than the lowest (28.81 percent) in August of 2015 when massive selling took place last year and the lowest since April 2009 when the portion dropped to 25 percent.

Foreigners are showing a record-setting selling spree over the past two years. They sold off stocks amounting to a total of 5,893.0 billion won from December 2, 2015 to January 25, 2016. Over the 36 trading days, they incessantly sold off stocks for 35 trading days except for net buying due to a block deal of Korea Aerospace Industries on January 6. Foreigners are selling off Korean stocks due to stronger US dollars, a psychology to head off risk in newly emerging markets on account of an economic slump in China and plummeting international oil prices.     

Foreigners’ trading patterns is one of important elements which decide directions for the Korean stock market. Some analysts say that with the Korean Composite Stock Price Index (KOSPI) down at the 1,800 level, trend-affecting rallies are hardly expected without a change in foreigners’ trading patterns.

“Over the past two years, KOSPI trends have hinged heavily on the basic tone of foreigners’ trade,” a stock market expert said. “Unless foreigners’ trade switches to net buying, the market will be hardly able to bounce back.” A drop in the value of US dollars, the stabilization of the Chinese economy and a hike in international oil prices hold the key to leading foreign investors to take a stance of net buying in the Korean stock market, he added.