Foreign investors are concentrating their investment in the South Korean stock market on Samsung Electronics and SK Hynix. Experts point out that the lopsidedness will be reduced and the Korea Composite Stock Price Index (KOSPI) will be able to keep rising if the manufacturing indices of the United States and China rise.
The KOSPI topped 2,200 points in about seven months on Dec. 20 with the first-phase trade negotiation agreement between the United States and China expected to lead to a global economic recovery. That day, the index edged down but remained over 2,200 points. Foreign investors’ net buy resumed on Dec. 17 and added up to 1.33 trillion won for five days.
For the past two weeks, foreign investors net-bought KOSPI stocks worth a total of 2.2 trillion won, including 1.9 trillion won of Samsung Electronics and SK Hynix shares. According to market experts, passive stock funds investing in emerging markets need to attract more money for the KOSPI market as a whole to benefit from the net buy. Also important are the won-dollar exchange rate and the United States’ and China’s manufacturing indices. “In 2016 and later, money flow into the funds was strongest when the indices rose together,” Hana Financial Investment explained, adding, “In addition, the dollar index showed the steepest fall when the Institute for Supply Management manufacturing index rose.”
The manufacturing purchasing managers index (PMI) of China recovered in seven months to 50.2 points last month, when its infrastructure investment bond issuance continued to increase to lead to more down payments for new construction projects. The PMI is expected to rise more in that the index tends to reach an annual high in the first quarter.
Last month, the U.S. ISM manufacturing index fell for the fourth consecutive month to 48.1 points. However, the U.S. IT sector’s capital expenditure forecasts are showing a rapid improvement and the Donald Trump administration’s policy for the manufacturing sector is another positive factor. The United States’ industrial output is expected to rebound. Its capacity utilization recently rose from 76.6 percent to 77.3 percent and its year-on-year industrial output growth improved from negative 1.3 percent to negative 0.75 percent.