Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Chinese leaving Seoul bourse amid THAAD row
By Park Jae-hyuk
Chinese investors are rapidly withdrawing their money from the Korean stock market, since the two countries came into conflict over the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) battery here.
This year alone, Chinese have sold a net 468 billion won ($413 million) worth of Korean stock as of last month, according to the Financial Supervisory Service, Tuesday.
Those investors have continued to dispose of local stocks over the past nine months, except this January, when they purchased a net 38 billion won worth of Korean shares.
They had annually purchased a net 1 to 2 trillion won worth of stocks here until 2014, but Chinese capital worth 136 billion won left the Seoul bourse in 2015. The amount increased to 1.6 trillion won last year.
Analysts attribute the THAAD row as one of the main reasons for the capital outflow.
The political issue first came up in December 2015 and has heated up since last July, when the Korean defense ministry announced its plan to deploy the missile defense system in Seongju, North Gyeongsang Province.
The Chinese government has taken retaliatory measures, including a de facto ban on Chinese tour agencies from offering group tours to Korea and restrictions on cultural content.
As the retaliation continues despite the government change here, Lotte Mart outlets still remain closed in the world’s most populous country. Lotte has suffered great setbacks there, since the conglomerate offered its golf resort as a site for the deployment.
Observers said that those who invested in cosmetics, tourism and casinos appear to leave the Seoul bourse, as the related stocks were severely hit by China’s economic retaliations.
The capital outflow may become even worse, because Beijing has regulated Chinese companies doing massive currency exchanges and foreign investments amid the weak Chinese yuan, according to analysts.
U.S. investors, on the other hand, have purchased a net 61 trillion won worth of Korean stock since the global financial crisis in 2009. This year alone, they have bought a net 969 billion won worth of stocks as of last month.
However, many foreign investors may exit the Korean stock market, as China’s A-share is highly likely to be included into Morgan Stanley’s Capital Index (MSCI) this Wednesday.