Foreigners extend sell-offs of Korean stocks to 4th month in April

Lead

Foreign investors extended their selling of South Korean stocks into a fourth consecutive month in April, though the pace of outflows slowed markedly from the previous month's record, according to data from the Financial Supervisory Service (FSS) as reported by Yonhap News Agency.

Offshore investors sold a net 4.05 trillion won (US$2.68 billion) worth of local stocks in April, following a record high net selling of 43.51 trillion won in March, the FSS data showed. This compares with a net sale of just 19.56 billion won in February, indicating how sharply foreign selling accelerated in March before cooling in April.

Coverage Comparison

Two separate reports from Yonhap News Agency covered the trend, one focusing on April data released on May 29 and another on May 31 detailing May's record-breaking sell-off. Both reports rely on official data from South Korean financial regulators and the Korea Exchange (KRX).

The April report emphasized the reduced scale of selling, while the May report highlighted a new record high in foreign selling of KOSPI-listed stocks and a contrasting record inflow into the tech-heavy KOSDAQ market. Neither report offered extensive commentary on causes, though the May piece noted market watchers' attribution of the sell-off to profit-taking after a tech rally.

Key Claims

• Foreign investors sold a net 4.05 trillion won of Korean stocks in April, a sharp decline from March's record 43.51 trillion won, according to FSS data.
• Offshore investors' holdings of local stocks stood at 2,121.4 trillion won as of end-April, representing 32.5% of total market capitalization, per the FSS.
• Singapore-based investors were the top sellers in April, offloading a net 3.4 trillion won worth of shares, followed by British investors with 2.5 trillion won, the FSS data showed.
• In the bond market, foreign investors purchased a net 8.08 trillion won of local bonds in April, boosting their holdings to 325.2 trillion won (11.6% of listed bonds), according to the FSS.
• In May, foreign selling of KOSPI-listed stocks reached a record net 44.71 trillion won, surpassing March's 35.74 trillion won, according to KRX data. Foreign investors were net sellers for 16 consecutive sessions from May 7 to May 29, the longest streak since 2009.
• Retail investors bought a net 36.09 trillion won worth of stocks in May, a record monthly net buying, the KRX reported.
• Foreign investors also set a record in May for net buying on the KOSDAQ, with 2.8 trillion won, exceeding the previous high of 2.7 trillion won in July 2023.

Perspectives

Market watchers, as quoted by Yonhap, attributed the May sell-off largely to profit-taking following a tech rally led by chipmakers Samsung Electronics and SK hynix. The simultaneous surge in KOSDAQ buying was partly linked to expectations around the newly launched Korea National Growth Fund, which offers tax benefits and loss protection, and targets investments in AI, rechargeable batteries, hydrogen, and biotech sectors.

Retail investors have acted as a counterweight, absorbing a record amount of shares in May, which analysts may interpret as a sign of domestic confidence despite foreign outflows. The April data showing reduced selling suggests that the extreme volatility seen in March did not escalate further in April, although the May figures indicate renewed intensity in KOSPI selling.

These developments occur against a broader backdrop of global market uncertainty and shifting investor sentiment toward Asian equities. The divergent trends in KOSPI and KOSDAQ, as well as the contrasting behaviors of foreign and retail investors, illustrate the complexity of current market dynamics in South Korea.