SEOUL — Foreign investors sold billions of dollars worth of South Korean equities this year, with net outflows from the Kospi reaching approximately $62 billion as of late May. This occurred as the Kospi index achieved record year-to-date gains.
On a recent trading day, overseas investors sold a net 1.24 trillion won of Kospi-listed shares, according to Korea Exchange data. This amount was approximately $801 million. Chetan Seth, Asia-Pacific equity strategist, stated, "This is essentially forced selling that we are seeing from our investors and clients."
International investors face regulatory limits on ownership stakes in individual Korean companies after price increases. Active fund managers reduced positions in Korean equities to remain within portfolio and risk limits. Nick Wilcox, Head of Asian equities, said, "A lot of the selling is forced selling because investors are coming up against active limits."
Domestic investment purchases have exceeded foreign sales in the Korean equity market this year. Retail investors contributed approximately $70 billion to the Korean market this year, and the number of newly opened brokerage accounts has increased. Wilcox said, "The outflow from foreigners has been more than made up for by domestic investors."
Seth said, "I think the same dynamic might play out in Korea as well." Rising domestic retail participation in India historically crowded out foreign investors. The weighting of Korean stocks in global and emerging-market benchmarks has increased. The Korean equity market performance has concentrated heavily in Samsung Electronics and SK Hynix. Goldman Sachs increased its 12-month Kospi target to 12,000 and projected a 37 percent upside in a recent publication.