Overseas Investors Dump Korean Stocks

Foreign investors have turned to selling on October 12, after purchasing stocks during the previous sessions, which had been a cause for interest considering the huge bearish factor of North Korea’s nuclear test.

In regard to this, many stock analysts are suggesting that it may be short-term investors taking profits, after having come in when stocks dropped heavily.

This day on the stock market, foreign investors sold out a total of 124.4 billion won worth of stocks, with 123.7 billion won in the exchange market and 700 million won in the Korea Securities Dealers Automated Quotations (KOSDAQ). There were also more ‘selling’ requests in futures.

The Korea Composite Stock Price Index (KOSPI) rose 6.29 points (0.47%) from the previous trading session to finish at 1,331.78 on this day, despite foreign investors selling out after five days. This is because although foreigners and institutions turned to net selling (the amount after removing purchases from sales), individual investors bought a total of 154.1 billion won net. It is the first time this month that foreigners have taken a selling position in the exchange market, KOSDAQ and the futures market.

According to Yoon Se-wook, head of the research center at Meritz Securities, “It looks as though short-time playing hedge funds came in when there was a heavy fall in the market and are now settling their positions.” He added, “There are investors who have turned to profit-taking and some investors who had wanted to sell before, but weren’t able to because it couldn’t be traded.”

Director Lee Nam-woo at Meritz Securities said, “Foreign investors buying in domestic stock for the last three to four days were just a short term move. Foreigners are concerned about North Korea’s nuclear crisis issue and are aware that Korea’s economy is in a weakened position, so the selling out which has been going on for the last few months is expected to continue.”

Selling Out In Korea Is Predominant Among Asian Stock Markets-

Foreign investors have shown a ‘buying’ position in Asia’s most other stock markets but have continued to pull out money from Korea. According to Korea Exchange, foreigners sold 1.638 billion dollars worth of Korean stocks (including KOSDAQ) in September, net selling for five consecutive months.

In contrast, there were more purchases than sales in Asia’s newly rising markets such as Taiwan ($2.395 billion), India ($1.339 billion), Thailand ($291 million) and Indonesia ($102 million). In particular, foreigners have bought in $5.65 billion worth in the Japanese stock market, the largest net buying amount in four months.

The only stock market among those researched that foreign investors net sold, besides Korea, was the Philippines ($20 million).

ssoo@donga.com