Foreign investors are going on a selling spree. They sold more than 1.50 trillion won (US$1.26 billion) worth of stocks in the past four days, dragging down the KOSPI index to the 2,020 level. Foreign investors are suffering losses from the weak won, and are more likely to take a wait-and-see stance for a while.
The benchmark KOSPI plunged 25.51 points, or 1.25 percent, to close at 2,023.32 on May 29, barely keeping the 2,020 level. Foreign investors net sold 718.80 billion won (US$601.76 million) worth of stocks, the highest figure this year, on May 28, and 361 billion won (US$302.22 million) on opening on May 29. Institutional and retail investors net purchased 170.80 billion won (US$142.99 million) and 193.80 billion won (US$162.24 million) worth of stocks, respectively. They tried to defend the index but it was not enough. The secondary KOSDAQ fell 11.29 points, or 1.61 percent, to close at 691.47. Foreigner also net sold 130.30 billion won (US$109.08 million) in the KOSDAQ market. The figure is the second highest this year after 161.60 billion won (US$135.29 million) on May 16.
Foreigners made net purchases on the KOSPI market every month from the beginning of this year, but they became net sellers this month. In particular, they offloaded stocks from May 9 to 10 (local time) after the trade negotiation between the United States and China broke down. Foreign investors had been on a buying spree for four straight days from May 2 to 8, but they have been on a selling spree since May 9, except for only three trading days from May 21 to 23. Foreigners net sold over 2.70 trillion won (US$2.26 billion) worth of stocks this month, with 1.58 trillion won (US$1.32 billion) of them sold over the four trading days alone from May 24.
Experts said that the trade war between the United States and China, which show signs of protraction, unnerved foreign investors and concerns over foreign exchange loss caused by the rise in the won-U.S. dollar exchange rate made them sell more stocks. Ha In-hwan, an analyst at Meritz Securities Co., said, “The KOSPI index was 2,049 points as of May 28, but when seen in terms of the U.S. dollar, the index is 1,930 points.” He also said that the rate of return of foreign funds which flowed into the domestic market since the beginning of the year is estimated at minus 9 percent.
Recently, institutions make net purchases as much as foreigners make net sale but it is not enough to prevent the index from falling. The South Korean stock market can be stabilized only when foreigners show a buying trend. Moreover, the stabilization time is expected to be the third quarter at the earliest.