Foreign investors on path to return to KOSPI

An aerial view of the Yeouido financial district of Seoul / Yonhap

By Lee Min-hyung

Foreign investors are on a path to return to the benchmark KOSPI after a two-month hiatus amid the earnings recovery momentum of large-cap tech stocks, data showed Friday.

Data from the Korea Exchange showed that foreign investors shifted to buying between Aug. 1 and Aug. 24, from a month earlier. This is the first time in two months that they took a buying side on the main bourse after dumping local shares in June and July.

Foreigners' net buying of KOSPI-listed shares totaled 169.8 billion won ($128.39 million) for the first 24 days combined this month. The shift was driven by a return to major blue-chip semiconductor stocks here. Foreign investors purchased 108.4 billion won worth of SK hynix and 45.6 billion won worth of Samsung Electronics shares, Thursday, in hopes for major earnings rebounds of those stocks in the third quarter.

It remains to be seen whether the foreign buying spree will continue amid unceasing global financial uncertainties represented by the U.S. Federal Reserve's repeatedly hawkish signals for additional rate hikes. China's property crisis and economic slump also add significant concerns to the growing risks of the Korean economy.

However, market analysts said a foreign capital inflow is expected in September on seasonal factors and the Chinese risk factor.

“On a seasonal basis, foreign investors have a tendency to purchase local stocks sometime around September, with some expecting year-end dividends, and local institutional investors also tend to do so as the year-end approaches,” DS Investment & Securities analyst Yang Hae-jung said.

The expert pointed out that the China risk may come as a boon for the local stock market.

“This definitely poses a negative impact on Korea's overall economic recovery, slowing down the pace of export rebound and corporate earnings growth,” the analyst said. “But the conflict between the U.S. and China may push some pension funds to reduce their portion in China and seek more opportunities in Korea. Against a similar backdrop, the China factor will also bode well for the foreign capital inflow here.”