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Foreign Investors Dump Futures Contracts on Seoul Bourse
Anxious About Korean Stock Market
Foreign Investors Dump Futures Contracts on Seoul Bourse
  • By Yoon Young-sil
  • January 7, 2019, 15:08
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Foreign investors dumped futures contracts on the Seoul bourse, revealing their anxiety about Korean stock market.

Foreign investors net sold 15,000 contracts of KOSPI 200 futures for the first three trading days of this year, suggesting that they are anxious about the South Korean stock market. Market experts said the massive selling spree of futures contracts was triggered by a sudden fall of the stock markets in China and Hong Kong.

Korea Exchange (KRX) said on Jan. 4 that foreign investors sold off 11,028 contracts of KOSPI 200 futures worth 721.7 billion won (US$642.08 million) on Jan. 2, 1,105 contracts worth 72.2 billion won (US$64.23 million) on Jan. 3 and 2,824 contracts worth 182.1 billion won (US$162.01 million) on Jan. 4. They net sold a total of 14,957 contracts worth 976 billion won (US$868.33 million) for the first three trading days this year

Foreigners sold off more than 10,000 contracts of KOSPI 200 futures for the first time in two months after 11,288 contracts were sold on Nov. 2 last year. The aggressive offloading of futures by foreign investors, accompanied by massive stock sales by institutional investors, including domestic securities firms, made the Seoul bourse bearish for two days from Jan. 2 to 3.

Market analysts named several reasons for foreigners’ futures sell-off. As the Hong Kong Hang Seng China Index (HSCEI) fell below the 10,000 level and the China Shanghai Composite (SSEC) Index also showed a steady downturn this year, stock markets in emerging countries as a whole experienced a selling trend. Some attributed the phenomenon to investors’ sales of the shares they net purchased at the end of last year to reduce losses. Foreign investors net purchased 17,394 contracts of KOSPI 200 futures worth 1.14 trillion won (US$1.02 billion) for four trading days from Dec. 17 to 20 last year.

In general, futures show a selling trend when the outlook for the stock market is dim in the future. However, it is still unclear that the selling trend will intensify in the future as futures are based on forecasts for future stock prices. As the domestic stock market is adversely affected by concerns over the stock markets of emerging countries as a while, the Chinese stock market is attracting attention.

The South Korean stock market was more synchronized with the Chinese stock market than the U.S. market last year. Some expect the possibility of the Chinese stock market rebounding on the back of the Chinese government’s economic stimulus plans and progress in trade negotiations between the United States and China.

Meanwhile, the benchmark KOSPI index fell below the 1,990 level in early trading on Jan. 4 but it turned around thanks to strong buying of institutional investors led by the National Pension Service. The KOSPI rose 0.83 percent to the 2,010 level, while the secondary KOSDAQ index closed up 1.14 percent at 664.49.