Foreign Selling Likely to Continue
By Park Hyong-ki
Staff Reporter
Foreign investors are expected to remain sellers for the time being as they will continue to take profits, analysts said. They said foreign investors are unlikely to turn active buyers until the benchmark index falls to around 1,800 points.
Foreign investors were net sellers for 14 consecutive days until Thursday on the main bourse. They tuned modest net buyers on Friday.
In the last two months to date, foreigners dumped some 9 trillion won shares, the highest net selling since May-June 2000 when they sold over 6 trillion won, according to Seoul Securities.
``Foreign investors are seeing shares not so cheap as before. That's why they are trimming shares,'' said Kim Joong-hyun, an analyst at Good Morning Shinhan Securities. ``Foreigners are unloading all sorts of stocks from shipbuilding and financials.''
He added that the market may have to suffer a longer-than-expected correction, should this trend continue.
He said that institutional and retail buying will not be enough for the key index to recover the 2,000-point level and settle above that mark.
Concerns over the subprime lending glut in the United States will also keep foreign investors hesitant to return to Seoul stocks.
Solid fundamentals such as positive corporate earnings and economic outlooks have helped boost Seoul stocks to climb the highest among worldwide indices in the last couple of months. But analysts have expressed concerns over recently too steep gains in too short a period of time.
Chi Ki-ho, an analyst at Seoul Securities, said, ``Foreign investors are unlikely to turn aggressive buyers for the time being.''
Samsung Securities analyst Lee Na-ra also said that foreigners believe that Seoul stocks are not attractive in valuation in the eyes of foreign investors.
``On top of foreign selling, credit crunch woes in association with subprime problems could weigh on the market,'' Lee said.
However, analysts are generally optimistic about the long-term outlook on ample liquidity on the market.
``Ample liquidity will provide a floor under the market,'' Samsung's Lee said.
Foreigners' shareholdings dropped to 30 percent of the market capitalization, from 40 percent early last year. The combined market cap dropped by 38 trillion won to 1,027 trillion won.