Foreign investors who unleashed a 1.25 trillion won selling wave in Korea's stock market in July were found to have bought exchange-traded funds (ETFs).
According to the Korea Exchange (KRX) on the 19th, foreign institutional investors made a net purchase of 593.7 billion won in domestic ETFs from the 1st to the 16th of this month. Of the 12 trading days, they showed net buying on 10 days, excluding the 1st (-135.4 billion won) and the 6th (-293.1 billion won).
During the period, the ETF most bought by foreigners was "KODEX Leverage" (195 billion won). That was followed by "KODEX 200" (180.6 billion won), "KODEX 200 Futures Inverse 2X" (130 billion won), and "TIGER US Philadelphia Semiconductor Nasdaq" (102 billion won).
Foreign institutional investors' net buying of domestic ETFs contrasts with their recent net selling in the local stock market. In fact, from on the 1st to the 16th, foreigners were net sellers of 12.0122 trillion won on the Korea Composite Stock Price Index (KOSPI) market and 338.1 billion won on the KOSDAQ market, totaling 12.5087 trillion won.
The analysis is that foreigners chose ETFs to reduce portfolio risk. Domestic ETFs are index-linked funds designed to track the returns of specific stock indexes such as the KOSPI200 index and the KOSPI50 index, and are cited for their diversification benefits.
Indeed, among the top net-purchased domestic equity ETFs by foreign investors were products that track the KOSPI200 index and inverse products that can generate revenue when the index falls. Even single-stock leverage products appeared among both the top net buys and net sells.
An official at a securities firm said, "It can be seen as investing in opposing ETFs to reduce portfolio risk," adding, "In particular, shedding individual stocks and holding both index and inverse products is a signal to delay a decision until a clear direction emerges."