Due to N. Korea Risk
Foreign investors’ Korean stock purchase significantly reduced in July. In particular, “China Money” keeps pulling out of the domestic stock market due to the aftermath of the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system and Middle Eastern capital shows a selling trend starting from April. Moreover, an increasing number of U.S. investors, which own a considerable amount of local stocks, realized a profit from the sale of their shares due to higher risks caused by North Korea. Accordingly, the size of purchases fell below 1 trillion won (US$877.19 million) from 2 trillion won (US$1.75 billion) each in May and June.
According to the Financial Supervisory Service on August 16, foreign investors net purchased 579 billion won (US$507.89 million) worth of local shares last month. Foreign ownership in South Korean stocks exceeded 600 trillion won (US$526.32 billion) for the first time. However, their purchases went downward trend. Foreign investors bought 1.76 trillion won (US$1.54 billion) worth of stocks last month but their purchase in July stood at the 32 percent level compared to the previous month. Notably, foreigners sold 1.08 trillion won (US$950 million) worth of stocks for four days from July 26 to 31. During the period, the KOSPI index dropped from 2,434.51 on July 26 to 2,401.71 on July 31.
By country and region, U.S. and European invsetors showed the highest decrease in purchases. U.S. investors, who take up the largest share in the foreign stock investment with 40 percent, net bought 1.85 trillion won (US$1.62 billion) worth of stocks in June. However, they net purchased only 944 billion won (US$828.07 million) worth of stocks last month. U.S. investors continuously net sold 1 trillion to 3 trillion won (US$877.18 million to 2.63 billion) worth of stocks this year, excluding 310 billion won (US$271.93 million) of net sale in April, but their net sale dipped below 1 trillion won (US$877.19 million) in July for the first time. British investors also net bought 141 billion won (US$123.68 million) worth of stocks but net sold 530 billion won (US$464.91 million) worth of stocks last month. Germany and Ireland also net sold 82 billion won (US$71.93 million) and 125 billion won (US$109.65 million) worth of stocks. China has net sold 76 billion won (US$66.67 million) worth of stocks from the beginning of the year owing to the THAAD issue, and Middle East has also net sold its stocks from April.
The Asian market overall recently saw withdrawals of capital. According to a survey conducted by the Korea Stock Exchange (KRX) about the foreign fund trend in Asian stock markets, such as South Korea, Taiwan, India and Thailand, from January 1 to the first week of August, foreign investors steadily net purchased US$2.8 billion to 11.9 billion (3.19 trillion won to 13.57 trillion won) worth of Asian stocks a month from January to June but they started selling the stocks in July. The amount of foreigners’ net sale of Asian stocks totaled US$146 million (166.44 billion won) in July and US$375 million (427.5 billion won) during the first week of August alone.