Foreigners Have Sold ₩200 Trillion of Korean Stocks This Year. Retail Investors Are Holding the Line.
On October 13, the KOSPI fell 5.46%. Korean financial press reported that foreign investors have now sold more than ₩200 trillion of KOSPI stocks, net, this year. Some analysts say individual investors are now holding up the index almost on their own. I don’t feel like buying Korean stocks at all right now.
Two Bad Days in a Row
The drop on the 13th came after an already bad day. According to local reports, the KOSPI closed at 6,035.35 (in Korean), and during the day it was down as much as 7.41%. During the day it fell below 6,000, the first time below that level since late July. A sell-side sidecar was triggered for the first time in about two months, which paused program trading for five minutes.
| Oct 12 | Oct 13 | |
|---|---|---|
| KOSPI close | 6,384.24 | 6,035.35 |
| KOSPI change | −3.65% | −5.46% |
| Foreign selling on KOSPI | ₩2.0186 trillion (sold) | ₩4.5128 trillion (net sold) |
| Foreign net selling this year | about ₩197 trillion | over ₩200 trillion |
This year’s foreign selling has been focused on two names, Samsung Electronics and SK Hynix. On the 13th, Samsung Electronics fell 7.39% and SK Hynix fell 10.09%. Local reports say foreign ownership of Samsung has dropped to the 46% range, the lowest since 2008 (in Korean), and SK Hynix is now below 50%. This blog has looked at these two chipmakers before.
The reasons given in the Korean press are mostly about AI. Analysts point to doubt over whether AI spending can continue while interest rates stay high. Chinese memory maker CXMT said it would release next-generation DRAM by the end of the year, which raised worries about competition for Samsung and SK Hynix. Brent crude also rose to $106.65, its highest in about a month. Japan and Taiwan fell sharply on the same day, so this was not only a Korean problem.
Who Is Left to Buy
For a while, share buybacks at SK Hynix and Samsung helped slow the fall. Those buybacks are now near their end, and analysts say the index has lost some of its support from below. Local reports also say Korean pension funds and insurers have little room to buy more. That leaves individuals. Local reports describe them as the main buyers holding up the index (in Korean).
Readers outside Korea may find the way this story is told odd. Korean market news is often framed by who bought and who sold: foreigners, institutions, individuals. Each group is treated almost like a team. That framing comes with a common saying here: if you follow individual investors, you lose money; if you follow foreigners or institutions, you make money.
I actually believe it, mostly. Individual investors as a crowd sit at the far end of the information chain. By the time news reaches the crowd, the price has often already moved. If you copy what the crowd does, the chance is very high that you buy when the price is already at the top, chasing the rise, and then sell near the bottom out of fear.
So when the headline says retail investors are almost alone in holding up the index, I don’t read it as a brave stand. I read it as a warning sign. That is why I have no urge to buy Korean stocks on this dip, even though they look cheaper than they did a week ago.
Around Me
Someone I know has a large leveraged position in the KOSPI. Seeing that, I did not look happy.
Another acquaintance put money into the KOSPI for the first time yesterday, on the day of the 5.46% drop.
I can’t say how either of them will do. Both could still make money. But they are exactly the crowd the headlines are talking about, and the saying I believe in does not put them on the winning side.
What Would Change It
Brokerage analysts say that, compared with what the companies are worth, stock prices are now low enough for a rebound. They also say a lasting rebound will take time, and they list three things to watch (in Korean): foreign money coming back, long-term interest rates settling down, and higher earnings estimates for chipmakers from 2027 on.
The first one is the one I will be watching. If foreigners start buying again, the crowd will no longer be alone. Until then, I am staying out.