As the KOSPI breaks through the 9,000 mark to set a new record, the supply-and-demand landscape by market participant has been completely reversed. While foreigners, who had been on a selling streak, are showing signs of shifting to a buying bias, individual investors are moving in the exact opposite direction, making the "out-of-sync trading" more pronounced.
In fact, over the past 31 trading days, the trading direction of foreigners and individuals matched on only four days. According to the Korea Exchange (KRX) on the 18th, from May to that day, foreigners recorded a net sell of 6.473 trillion won in the KOSPI market, while individuals net bought 5.225 trillion won, taking on the supply from foreigners in full.
In particular, during the same period, foreigners dumped more than 2.712 trillion won of Samsung Electronics, which rose about 10% or more, and also net sold 2.432 trillion won worth of SK hynix, which climbed about 22% or more. In contrast, individuals actively absorbed Samsung Electronics (1.8 trillion won) and SK hynix (1.717 trillion won) sold by foreigners, supporting the index on the downside.
For the past 20 years, the unwritten rule of the Korean stock market was that "if foreigners buy, it rises; if they sell, it falls." But in the past two to three months, even amid a selling offensive by foreigners unloading tens of trillions of won, an abnormal phenomenon has unfolded with the index surging.
In the securities industry, there is a consensus that analysts should step away from conventional supply-and-demand interpretations and parse out the recent market's unique conditions.
Hwang Su-uk, a researcher at Meritz Securities, said, "Even though foreigners are selling an enormous amount of funds, their domestic stock equity ratio is actually trending higher," adding, "This is due to 'mechanical selling (rebalancing)' caused by prices rising too steeply." In other words, the diagnosis is that as the index rises, foreigners' rebalancing supply will inevitably continue to come out.
Lee Hyo-seop, a research fellow at the Korea Capital Market Institute, said, "With preparations for listing a Korea semiconductor ETF in the United States and the allowance of direct domestic investment by global investors, fund inflows centered on leading stocks remain solid." Lee added, "It will take time for a complete shift to a net-buying stance by foreigners, but selective inflows focused on leading stocks will continue going forward."
Indeed, even amid foreigners' mechanical weight adjustments, the trend of "selection and concentration" is clear. On the day, foreigners bought nearly 900 billion won of Samsung Electronics, a leading stock, and also net bought 420 billion won of Samsung Electro-Mechanics.
The securities industry expects that a full-fledged return of foreign funds will stabilize the surging exchange rate and inject strong momentum back into the capital market. In particular, it points to the biggest variable for the direction of flows as whether Korea will be included in the Morgan Stanley Capital International (MSCI) developed market index, scheduled for late June.
On the other hand, if inclusion falls through, there are concerns that additional inflows of foreign funds could be limited in a market burdened by high levels.
An official in the securities industry said, "Given the index's sharp rise in a short period, some cooling of the current short-term overheating is needed for foreigners to return fully," adding, "With volatility heightened as interest rates have risen unexpectedly on a macroeconomic level, it is necessary for now to watch the process of absorbing foreigners' rebalancing supply and approach the market cautiously."