SEOUL -- Foreign investors rushed to buy South Korean stocks worth 6.48 trillion won ($5.3 billion) on a net basis in January on the back of the weak U.S. dollar and growing expectations of a global economic recovery, according to data released by the Korea Exchange (KRX) on February 2.
The monthly net purchase by foreigners was the largest since they bought 6.95 trillion won in January 2012. Their net buying reached an all-time high of 8.46 trillion won in September 2013.
Foreigners kept taking a long position on the main bourse in Seoul last month, except for two days. Helped by their buying spree, the benchmark KOSPI gained 9.57 percent last month to close at 2,425.08 points on January 31. The local market finished 0.78 percent higher at 2,468.88 on February 2.
Foreigners bought 2.22 trillion won worth of Samsung Electronics shares, followed by SK hynix with 632.2 billion won. They focused on bargain hunting for the two IT giants, despite their disappointing earnings results for 2022, believing that the slumping memory chip industry will turn around in the latter half of this year.
Foreigners also purchased Shinhan Financial shares worth 264.4 billion won and Hana Financial shares worth 225.6 billion won. Hyundai Motor Co. was also their favorite stock with their net buying estimated at 205.1 billion won.
Hi Investment & Securities analyst Park Sang-hyun said that foreigners led the market rally on expectations of the reopening of China's economy after its lifting of COVID-19 restrictions.
Foreigners are likely to maintain their "Buy Korea" position for the time being, boosted by signs of global inflation easing, a potential recovery of the Chinese economy, and a less-than-severe U.S. economic slump.
The dollar's weakness against other currencies like the Chinese yuan, the Japanese yen and the Korean won also contributed to global funds moving back to emerging market economies.
Major brokerage houses predicted that the KOSPI might rally further to as high as 2,580 points with the help of foreign buying. However, they cautioned that foreigners could change their position, depending on the fluctuation of the won-dollar exchange rate and a move by the U.S. Federal Reserve and the Bank of Korea to raise their key interest rates further.
Despite the foreign net purchase, Korean individual investors dumped their stock holdings. Their net selling was estimated at 5.63 trillion won last month. They bet on some inverse ETFs (Exchange Traded Funds) listed on the Seoul stock market, expecting the KOSPI to be on a downward march.
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