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| An aerial view of Korea's Yeouido financial district is seen in this file photo. Yonhap |
By Lee Min-hyung
The benchmark KOSPI is on track to enter an adjustment period amid a selling spree by foreign investors seeking to take profits sparked by a weakening valuation of the Korean won against the U.S. dollar.
According to data from the Korea Exchange, foreign investors net sold 893.2 billion won ($677.64 million) worth of Korean shares between June 1 and 29.
This trend has triggered fears that Korean stocks have lost growth momentum after extending a robust rally until earlier this month when it topped the 2,600-point mark. The KOSPI stood at around 2,200 points in January, but recovered buoyed by a massive buying spree by foreign investors who purchased 13.38 trillion won worth of Korean stocks between January and May. The main bourse stood at 2,560 points as of Friday.
Market analysts said a recovery of the local currency is key to attracting foreign capital in the latter half of this year.
"The KOPSI extended a rally of around 16 percent in the first half, and displayed one of the best performances among emerging markets," SK Securities analyst Ahn Young-jin said. "But when considering the performance of U.S.-listed exchange-traded funds, Korea lagged behind Poland, Mexico and Brazil. The Korean currency needs to strengthen more than the currencies of countries in Europe and Latin America, in order for the domestic stock market to attract more foreign capital in the latter half."
The won-dollar exchange rate reached this year's high of 1,344 won per dollar on May 12, but dropped to a three-month low of 1,272 won per dollar on June 13. The won weakened over the past few weeks, with the exchange rate rising again above the 1,300-won mark.
Other analysts left open the possibility of the KOSPI extending an adjustment period for the time being.
"The main bourse may experience readjustment patterns from a near-term perspective until the second-quarter earnings season begins, as no specific factors are being detected to rev up the KOSPI," Byun Joon-ho, an analyst at IBK Investment & Securities, said. "Investors should be aware of the fact that the KOSPI extended a rally (in the second quarter) due to multiple favorable factors after the collapse of U.S. Silicon Valley Bank in March."
Despite the abrupt selling spree, foreigners purchased 1.1 trillion won worth of Samsung Electronics shares this month alone on hopes for a recovery in global chip market conditions. Samsung is the most valuable firm by market capitalization here. Foreign investors bet on bigger gains of large-cap semiconductor shares, such as Samsung and SK hynix. They also went on a buying spree by snapping up 366.4 billion won worth of SK hynix shares during the same period.
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