At the end of last month, the share of foreign ownership relative to the total market capitalization of Korea's stock market hit the highest level in 5 years and 8 months. The buying was concentrated in the electrical and electronics sector.
On Jan. 4, the International Finance Center said in a report that foreign ownership relative to total market capitalization was 32.9% in December last year. Based on the Financial Supervisory Service's released "foreign securities investment trends," that is the highest since April 2020 (31.5%). However, the foreign ownership share as of the end of November disclosed by the Financial Supervisory Service was 29.6%, and the end-December figure has not yet been officially released.
The buying by foreigners was led by the electrical and electronics sector. In December last year, foreigners' net purchases in the electrical and electronics sector totaled 4.5 trillion won, exceeding foreigners' total net purchases across the market in the same period (3.5 trillion won). Among them, buying focused on SK hynix (2.2 trillion won) and Samsung Electronics (1.4 trillion won).
Analysts said expectations for improved results at domestic semiconductor corporations, driven by memory chip supply shortages and rising prices, spurred foreign buying. In addition, the relative undervaluation compared with overseas semiconductor stocks is cited as a factor attracting foreign funds.
In fact, while foreigners were net sellers of $1.6 billion in Taiwan's stock market, which has a high weighting in semiconductors, in December last year, they were net buyers of Korean stocks. The Taiwan market's 12-month forward price-earnings ratio (PER) is around 17 times, above the 10-year average of 14.7 times, whereas the KOSPI is around 10 times, similar to its long-term average.
Foreigners also continued net investment in the domestic bond market. Foreign holdings of bonds increased from 329.5 trillion won at the end of November to 339.3 trillion won at the end of December, centered on medium- and short-term notes.
The International Finance Center cited the following as reasons for simultaneous inflows into stocks and bonds by foreigners in December last year: ▲ recovery in the memory semiconductor cycle ▲ Korea's stock market being relatively undervalued ▲ policy expectations such as the third amendment to the Commercial Act and separate taxation of dividend income ▲ expanded arbitrage incentives due to bond yield movements.