Foreign investor net purchases of Korean stocks have reached more than 5 trillion won ($4.1 billion) this year on expectations that monetary tightening could be eased soon.

The latest buying spree is in stark contrast to their sales over the past three years during Covid. Domestic investors are hoping foreign investors’ moves will lead to an overall bullish market this year, beyond the “rabbit-year” rally. Some spectators, though, are on the sidelines until there are more clear signs of improvements.

As of Wednesday, foreign investors have net purchased 5.04 trillion won in Korean stocks so far in 2023, according to the Korea Exchange. On Wednesday alone, foreign investment topped its largest daily move this year, buying a net 768.1 billion won.

Foreign investors have regained their ownership share of KOSPI equity this year, after having sold a net 6.81 trillion won of stocks last year. KOSPI market cap owned by foreign investors topped 31.81 percent as of Wednesday, up from 30.38 percent in September last year.

“This rally is a reflection of the hope that austerity may end soon,” said Kim Hak-gyun from Shinyoung Securities Co. “Equity markets tend to respond ahead of actual changes in the economy. They saw rallies in 1998 following the Asian financial crisis and in 2009 following the global financial crisis the year before. Investors seem to believe that the bear market last year has already been reflected in recession expectations for this year.”

By country, the U.K. and the U.S. were the two biggest net buyers, spending 699.3 billion won and 525.9 billion won, respectively, as of Jan. 20. U.K. hedge funds tend to make short-term investments, while U.S. investors tend to invest long-term.

Ireland, France and Canada followed, with investors there spending 401.6 billion won, 270 billion won, and 258 billion won, respectively, into Korean equity markets this year so far.



Since 2020 and the beginning of the pandemic, foreign investors have mostly net sold Korean shares. Over the past three years, foreign investors have sold more than 57 trillion won of stocks. Including KOSDAQ, foreign investors sold more than 62 trillion won.

These past selling sprees are understood to have been arbitrage moves, thanks to upsurges in equity prices, leading to sales worth some 24 trillion won and 25 trillion won in KOSPI alone, respectively, in 2020 and 2021. Such selling did not affect underlying prices, leading to stock valuations rising.

However, the global bearish market last year curtailed such moves, with net sales narrowing to 6.81 trillion won. Falls in equity prices led to even larger falls in valuations. This may have led to the latest buying spree by foreign investors, in an attempt to increase the Korean shares in their portfolios. A relatively weaker won has also seemed to have affected such moves.

The most popular shares for foreign investors are in the export-driven industries, such as semiconductors. Despite their low performance at the moment, investors seem to see potential for Korean semiconductor firms.

Foreign ownership in Samsung Electronics Co. reached 50.17 percent, driven by their net purchases worth some 1.93 trillion won. Only 49.97 percent of the company was owned by foreign investors as of June 20 last year. SK hynix Inc. has also been popular among foreign investors with net purchases at 596.9 billion won. Companies including Hyundai Motor Co., Kia Corp. and POSCO Holdings Inc. have followed semiconductors, receiving investments worth 157.3 billion won, 106 billion wo and 131.5 billion won, respectively. Samsung Electronics and SK hynix saw a jump in their equity prices thanks to foreign buying sprees.

“Optimism in the global economy has led to market rallies partly as the U.S. Federal Reserve Board of Governors has eased its previously hawkish views,” said an analyst at Mirae Asset Securities Co.

Some investors, however, are not as optimistic, not seeing the recent foreign buying spree as any type of cue for an upward trend. As of Jan. 20, KOSPI’s forward 12-month price earnings ratio was 11.91, the highest since June 2021, according to Daishin Securities Co. Market analysts say that profit forecasts could be one indicator for the upcoming market trends, as companies are beginning to announce their fourth quarter earnings.

By Kang Min-woo and Chang Iou-chung

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]