Foreign investors, who have been continuing the "Buy Korea" trend in the domestic stock market, have turned their backs. They shifted to a selling mode for the first time in four months since April. The Korea Composite Stock Price Index (KOSPI) also dipped below 3,100 intra-day for the first time in over 40 days since the 8th of last month.
According to the Korea Exchange and others on the 21st, foreign investors have net sold a total of 628.2 billion won in KOSPI stocks this month. Just the previous day, the net selling amount was recorded at 227.5 billion won.
Up until last month, foreign investors had been continuing to net buy in the KOSPI. Starting with a net purchase of 1.1656 trillion won in May, they net bought 2.6926 trillion won and 6.2809 trillion won in June and July, respectively.
The KOSPI has not been able to escape a decline due to the outflow of foreign capital. The index surged to 3,288.26 at the end of last month but fell below 3,100 during trading the previous day. This marks the first time since the 8th of last month in over 40 days.
The investment sentiment has been completely stifled as bad news continues to accumulate, including the proposed tax reform plan that has incited backlash from investors, the "yellow envelope law" (revisions to Articles 2 and 3 of the Labor Union and Labor Relations Adjustment Act), and the controversy over the Czech nuclear power plant's "humiliating contract."
Foreign investors are even selling off what had been the leading stocks this year, known as "Jo Bang Won" (shipbuilding, defense, and nuclear power). The highest-selling foreign stocks include Hanwha Aerospace, Doosan Enerbility, and Hanwha Ocean.
Transaction amounts have also decreased. In June, the average daily transaction size of the KOSPI was 15.1998 trillion won. In July, it decreased to 12.9598 trillion won, and so far this month, it has dropped to 10.676 trillion won.
Han Ji-young, a researcher at Kiwoom Securities, said, "The leading stocks that had driven the KOSPI's rise are witnessing sharp declines one after the other this week, which has intensified the perceived strength of the index's drop."