Foreign investors buy a record 72 trillion won in a single day as selling pressure in South Korea’s stock market may reverse
At the end of July, South Korea’s stock market is undergoing a shift in the flow of funds led by foreign investors.
On July 31, foreign investors net bought KOSPI shares of about 72 trillion won, setting a new all-time high for the biggest single-day net buying. Citigroup research suggests this signal may mark the end of large-scale foreign outflows that have been going on for months.
Looking at the timeline over a longer period, the funding pressure that Korean stocks had previously endured was quite severe. In May and June, foreign investors net sold 445 trillion won and 484 trillion won, respectively. These two consecutive months of large-scale withdrawals were once a major force weighing on the KOSPI. Entering July, the net selling narrowed rapidly to 98 billion won, with a significant month-over-month decline.
At the same time, South Korea’s domestic pension funds and investment funds turned to net buying in July as well, with a规模 of about 1 trillion won. The offsetting moves between foreign and domestic players allowed overall funding pressure to ease quickly.
Citigroup breaks down this reversal in the flow of funds into two stages: earlier declines in the KOSPI were mainly driven by foreign investors rebalancing their positions and taking profits, which can be characterized as “turnover-driven” outflows. After mid-July, whether through direct inflows into the South Korean stock market or subscriptions for overseas KOSPI-related ETFs, the pace of money returning began to accelerate, culminating in this record-breaking buying at the end of the month.
Citigroup believes the most crucial change in the current South Korean stock market is that foreign investors have shifted from continuous selling to net buying. As selling pressure weakens, positive factors on the fundamentals and policy fronts are likely to re-emerge as the market’s dominant logic. Citigroup currently still maintains its target level for the KOSPI at 10,000 points.
#SouthKoreanStockMarket, #ForeignInvestorFlows, #KOSPI, #FundFlowAnalysis, #CitigroupResearch
At the end of July, South Korea’s stock market is undergoing a shift in the flow of funds led by foreign investors.
On July 31, foreign investors net bought KOSPI shares of about 72 trillion won, setting a new all-time high for the biggest single-day net buying. Citigroup research suggests this signal may mark the end of large-scale foreign outflows that have been going on for months.
Looking at the timeline over a longer period, the funding pressure that Korean stocks had previously endured was quite severe. In May and June, foreign investors net sold 445 trillion won and 484 trillion won, respectively. These two consecutive months of large-scale withdrawals were once a major force weighing on the KOSPI. Entering July, the net selling narrowed rapidly to 98 billion won, with a significant month-over-month decline.
At the same time, South Korea’s domestic pension funds and investment funds turned to net buying in July as well, with a规模 of about 1 trillion won. The offsetting moves between foreign and domestic players allowed overall funding pressure to ease quickly.
Citigroup breaks down this reversal in the flow of funds into two stages: earlier declines in the KOSPI were mainly driven by foreign investors rebalancing their positions and taking profits, which can be characterized as “turnover-driven” outflows. After mid-July, whether through direct inflows into the South Korean stock market or subscriptions for overseas KOSPI-related ETFs, the pace of money returning began to accelerate, culminating in this record-breaking buying at the end of the month.
Citigroup believes the most crucial change in the current South Korean stock market is that foreign investors have shifted from continuous selling to net buying. As selling pressure weakens, positive factors on the fundamentals and policy fronts are likely to re-emerge as the market’s dominant logic. Citigroup currently still maintains its target level for the KOSPI at 10,000 points.
#SouthKoreanStockMarket, #ForeignInvestorFlows, #KOSPI, #FundFlowAnalysis, #CitigroupResearch
