Electronic signboards at Hana Bank in Seoul show the benchmark KOSPI closing at 2,505.01 points, Friday, down 30.28 points or 1.19 percent from the previous session, while the Korean won closed at 1,305.8 won per dollar, strengthening by 15.8 won, on the same day. Yonhap
By Yi Whan-woo
Foreign investors returned to a buying spree of Korean stocks for the first time in four months in November, adding to optimism that such a pattern of purchase will go on this month as Korea is set to end a regulation to make stock investing easier for them.
According to the Korea Exchange (KRX), Sunday, offshore investors net purchased 4.68 trillion won ($3.6 billion) worth of shares on the Seoul stock market in November.
It marked a turnaround after they net sold stocks worth $910 million in August, $1.33 billion in September and $2.22 billion in October.
The buying spree was heavily concentrated on chip stocks, with Samsung Electronics accounting for 2 trillion won and SK hynix taking up another 679 billion won of the total values of the shares purchased.
Analysts said the net purchase last month is partly attributable to positive market sentiment ahead of the new rule taking effect, on Dec. 14, to accelerate foreign investors’ access to the market and to bring more money.
The Seoul financial regulator will remove the three-decade-old rule that requires foreign investors to register with authorities to trade local stocks.
Offshore investors will thereafter be allowed to open accounts with an internationally accepted identification, such as a passport for individuals, or a legal entity identifier for institutions.
“The deregulation is believed to help attract more international investors to the stock market here, coupled with a highly anticipated rebound for semiconductor stocks,” said Mirae Asset Securities analyst Kim Seok-hwan.
He noted the regulation was criticized for blocking foreign investments in stocks and deviating from the global standard after it was introduced in 1992.
Kang Jae-hyun, an SK Securities analyst, voiced a similar view, saying, “Foreign investors appear to be ‘testing the water’ on the Korean stock market before the new changes take effect, by purchasing large-cap stocks.”
The analysts said the U.S. Federal Reserve’s possible move to extend the rate pause is another plus factor to draw foreign investors to the Korean stock market.
Fed Chair Jerome Powell said last week it is too early to say confidently that the Fed had achieved a sufficiently restrictive stance or to speculate on when rate cuts would happen.
The U.S. rate remains at a range of 5.25 percent to 5.5 percent. It is higher than Korea’s 3.5 percent and has been a source of concerns that foreign investors can pull money out of the Korean market as they seek safe-haven assets.
“Under the circumstances, an extended rate pause and even rate cut could be possible beginning early next year, against a backdrop of a sharply slowing economy and rising unemployment,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).
Meanwhile, foreign investors offloaded some of their stocks in Samsung SDI, POSCO Future M and Korean rechargeable battery companies in November as the pace of sales in electric cars (EVs) slowed in the global market.