Foreign investors, who had been selling stocks of companies listed on the Korean stock market for nine consecutive months, reversed to net buying in May. Optimism about foreign capital inflow has increased as progress has been made in tariff negotiations between the United States and China and tensions between the two countries have eased. The securities industry is also predicting a possibility of a rise due to short covering.
According to the Korea Exchange on the 14th, foreign investors turned to net buying of 608 billion won this month after selling domestic stocks for nine consecutive months until last month. Foreign capital had been continuously exiting this year, with departures of 4.12 trillion won in February, 2.14 trillion won in March, and 10.1 trillion won in April.
In particular, last month, there were only three days of net buying while consecutive net selling continued for 10 trading days, indicating a severe selling trend. With the long-standing foreign selling trend turning to net buying in May, the market atmosphere has also changed significantly.
During the past week when net buying intensified (from May 7 to May 13), the most purchased stock by foreigners was SK hynix at 460.5 billion won, followed by APR at 135 billion won, LIG Nex1 at 122.1 billion won, and Doosan Enerbility at 120.4 billion won.
Foreign capital is focusing on the semiconductor sector, which has been a representative victim of the U.S.-China trade dispute. On the 12th (local time), the U.S. and China reached an agreement on a tariff truce, resulting in SK hynix surpassing 200,000 won during trading on the 13th, marking the first time it recorded '200,000 Nix' since the 2nd of last month. Despite net selling by individuals and institutions, foreigners purchased 190 billion won worth of stock on that day, driving the stock price higher.
Foreigners also paid attention to Samsung Electronics, currently the largest company by market capitalization. Until the beginning of this month, they had sold Samsung Electronics for six consecutive trading days; however, as tariff concerns subsided, they net bought 134 billion won on the 12th. This is the largest purchase size since March 27, showing a clear preference for the semiconductor sector.
Kim Dong-won, a researcher at KB Securities, noted, "The tariffs between the U.S. and China were devastating for domestic memory semiconductor companies that are assembled in China and Taiwan and exported to the U.S.," and evaluated, "This tariff suspension agreement is likely to positively impact the semiconductor stocks."
Kim further stated, "The 12-month forward price-to-book ratios (PBR) for Samsung Electronics and SK hynix are 0.9 times and 1.2 times, respectively, indicating that uncertainties have already been significantly reflected in the stock prices," and added, "The direction of stock prices will depend on whether tariff uncertainties are resolved early. "
Foreign capital is also flooding into the shipbuilding sector. This is because Korean shipbuilders are being highlighted as representative beneficiaries of U.S. President Trump's shipbuilding reconstruction policy.
In particular, HD Hyundai affiliates, which recorded 'surprise performances' in the first quarter and have maintained solid growth, accounted for three spots among the top 10 stocks with foreign net buying during the same period. HD Hyundai Mipo (94.7 billion won), HD Korea Shipbuilding & Offshore Engineering (63.9 billion won), and HD Hyundai Heavy Industries (60.9 billion won) were among the top foreign purchases. Recently, the shipbuilding industry has entered a structural growth phase as the ships ordered to cope with increased maritime cargo volume after the pandemic have been reflected in their performance.
Meanwhile, there have been analyses suggesting that foreign capital is entering as the recent trend of interest rate cuts has expanded preferences for riskier assets.
Yang Hae-jeong, a researcher at DS Investment & Securities, analyzed, "As safer assets like gold decline and riskier assets like Bitcoin rebound, if an environment with resumed risk preference arises, the domestic stock market may see a rise due to short covering, finishing with a foreign repurchase."