Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Foreign investors dump Korean shares amid uncertainties
U.S. President-elect Donald Trump attends the America First Policy Institute gala at Mar-A-Lago in Florida, Thursday (local time). Reuters-Yonhap
By Lee Yeon-woo
US policy, currency woes drive investors away
Foreign holdings in the benchmark KOSPI hit a yearly low amid concerns over a potential U.S. policy shift and a volatile won-dollar exchange rate, market watchers said.
As of Friday, foreign investors' holdings in the KOSPI market totaled 637.4 trillion won ($456.6 billion), marking the lowest level this year, according to the Korea Exchange. In November, they continued their selling streak, net selling 1.8 trillion won. The only exceptions were brief net purchases on Nov. 4 and Nov. 7. Foreign investors now hold 31.4 percent of the KOSPI's total market capitalization.
Foreign investors' market share, which stood at 32.7 percent early this year, rose to 36 percent in July. However, it steadily declined to 33 percent in September and to 32 percent in October.
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"The broader Asian market experienced a plunge due to the 'Trump shock.' Investor sentiment has contracted amid concerns over escalating G2 conflicts," DS Investment & Securities analyst Woo Ji-yeon said. "In particular, the Korean market, already grappling with weak domestic demand, saw a significant outflow of foreign capital."
A potential shift in U.S. trade policy is raising concerns about Korea's key economic driver, exports. Meanwhile, foreign investors have focused their selling spree on Samsung Electronics, with net sales totaling 2.7 trillion won.
Amid reports that the U.S. presidential transition team is considering eliminating incentives under the CHIPS and Science Act, foreign investors have reduced their stakes in Samsung Electronics to 51.72 percent as of Thursday, the lowest level in 19 months. This led to a drop in Samsung's share price to 49,900 won on Thursday, its lowest point since the COVID-19 pandemic.
Samsung SDI was the second most-sold stock, with net sales of 338 billion won, followed by Hyundai Motor at 246 billion won and Hana Financial Group at 73 billion won. However, these amounts were substantially lower than the net sales of Samsung Electronics.
The soaring won-dollar exchange rate also dampened investor sentiment. The exchange rate, which stood at 1,370 won per U..S. dollar before Trump's election win, has risen steadily amid fluctuations, reaching 1,411.1 won during Thursday's trade, prompting verbal intervention by Korean foreign exchange authorities.
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Despite the ongoing downturn, the brokerage industry anticipates a rebound in the KOSPI if market anxiety subsides. Analysts argue that the current decline is excessively steep relative to the market's intrinsic value.
"A technical rebound is anticipated as uncertainties surrounding Trump's policies, corporate earnings, and supply-demand instability peak and begin to subside. The trajectory of the KOSPI is expected to depend on the recovery potential of sectors that have experienced steep short-term declines, including semiconductors, Samsung Electronics, secondary batteries, as well as growth stocks such as internet, pharmaceutical and biotech," Daishin Securities analyst Lee Kyoung-min said.