Foreign Selling Likely to Continue
By Park Hyong-ki
Staff Reporter
Foreign investors are likely to remain sellers of Seoul stocks due to U.S. subprime woes, rising energy prices and weakening investor sentiment, analysts said.
Signs pointing to weak balance sheets at U.S. financial firms for the fourth quarter are undermining investor sentiment on global bourses.
``Given external negatives, I think foreign investors' selling position will not change much until next year,'' said Park Suk-hyun, a strategist of Seoul Securities.
Foreign investors unloaded stocks worth about 23 trillion won since the beginning of this year. They were holding 306 trillion won worth of Seoul stocks as of Nov. 29, which accounts for 32.5 percent of the total market capitalization.
It represents a 4.7 percentage point fall from the end of 2006 and marks the lowest level in seven years since 2001.
Besides foreign sell-offs on global economic worries, the analyst pointed out that foreign investors are going to keep on selling to ``rebalance'' their portfolios by shifting their money to safer assets such as state bonds.
They are also shifting their funds to China, India and other emerging markets from Korea and Taiwan, the two biggest emerging equity markets.
Analysts, however, said that the Seoul market will be able to withstand foreign selling as retail investors are putting more money into funds.
Seoul Securities strategist Park said that foreign investors are still holding a relatively high portion of Seoul stocks and their continuous track of selling is ``not a grave concern.''
``I don't believe it will negatively affect the market in the long-run as Seoul stocks are still attractive compared to their valuation,'' said Park.
Park added that growing retail investments in equity funds will help offset foreign selling.
Korea Investment & Securities expects the domestic fund market to grow 18 percent to 365 trillion won in 2008 amid a shift from saving to investment. It forecasts equity funds to reach 160 trillion won next year, accounting for 44 percent of the total fund market, up from 35 percent this year.
Park Seung-hoon, the company's senior fund analyst, said: ``Retail investors will continue to drive up the fund market next year by expanding and diversifying their investments in riskier assets.''
Jung Seung-jae, an analyst of Mirae Asset Securities, also said: ``Retail and institutional investors have been picking up the slack made by foreign selling since May.''
Jung said increasing retail investments, growing investments by national pension funds and other types of funds will help offset sell-offs by foreign investors.