The share of foreign investors in Korea's stock market hit a yearly low last month. However, as selling by foreign investors has gradually eased this month, expectations are rising that they will resume investing in the domestic market.
According to the financial investment industry on Apr. 5, net selling by foreign investors in the Korea Exchange main board last month totaled 3.5748 trillion won. On a daily average basis, that amounts to 170.23 billion won.
The foreign ownership share of market capitalization stood at 36.27% at the end of last year, but had increased to 38.1% by the end of February. However, as foreign funds left in March, the foreign share of market capitalization on the main board fell to 36.28% as of the 31st of last month.
The foreign fund outflows appear to be due to the start of the Middle East war. However, foreign investor sentiment has somewhat recovered this month.
In fact, even though U.S. President Donald Trump delivered a national address on the 2nd saying he would "strike Iran hard," foreign net selling was limited to 641 billion won. The KOSPI fell 4.47% that day, deepening losses, but foreign funds left to a relatively small extent.
Since March, foreigners have continued net purchases on the main board. In April, foreign investors' net purchases totaled 26 billion won, or an average of 8.7 billion won per day. Although the net buying volume is not large, foreigners' share of market capitalization also inched up to 36.66%.
In the financial investment industry, there are projections that the return of foreign investors to the domestic stock market will accelerate. In particular, as earnings season arrives with Samsung Electronics' preliminary first-quarter results set for the 7th, it is expected to serve as a rebound for a recovery in foreign investor sentiment.
An industry official said, "In the past, there was only one case where foreigners switched to long-term net selling in a 'deep value' phase; in most cases, they shifted to net buying," and added, "With the introduction of return-to-domestic-market accounts (RIA) and inclusion in the World Government Bond Index (WGBI), an environment is being created that can attract foreign capital inflows."