Foreign investors offloaded more than 1.8 trillion won (US$1.67 billion) worth of shares traded on South Korea's main bourse. The government’s recent move to increase transfer and corporate taxes, the stronger Korean won as well as the pressure of the index rise this year encouraged foreigners to take profits. Experts said that the foreign investor sentiment is highly unlikely to recover until early next year when this year’s Q4 performance season will start.
According to the Korea Exchange on December 26, foreign investors net sold 1.83 trillion won (US$1.7 billion) worth of KOSPI shares from the 1st to the 22nd. Individual investors also net sold 3 trillion won (US$2.79 billion) of the shares over the same period, while institutional investors net bought 4.3 trillion won (US$4 billion).
Foreigners net bought 3 trillion won (US$2.79 billion) in October but dramatically dropped the net purchase to 83 billion won (US$77.2 million) in November. They even turned to the net sale this month. The trend of foreign investors’ “Buy Korea” changed to “Bye Korea.”
Market experts said the net sale by foreigners is not a temporary phenomenon. Lee Jong-woo, head of research at IBK Investment & Securities, said, “This is largely due to the sale of Samsung Electronics shares due to concerns over a possible slowdown in the semiconductor industry. The U.S. stock market is maintained at an all-time high. However, it is true that the South Korean stock market has lost the investment attractiveness as it lost 100 points from the high mark.” Jung Da-ee, an analyst at Meritz Securities Co, said, “As South Korea’s dividend rates stood at some 1 percent, foreign investors' confidence has been shrunk.” Some industry watchers also pointed out that the government’s base of policy, including the rise in transfer and corporate taxes, reduced the investment attractiveness.