Foreign Investors Shed 20T Won, Holdings Top 2,000T

Foreign Investors Divest Heavily from Korean Equities Amidst Market Surge

In February, foreign investors engaged in a significant sell-off of South Korean stocks, divesting nearly 20 trillion won (approximately $15 billion USD) from the domestic market. This substantial net selling occurred just prior to escalating geopolitical tensions, notably the outbreak of conflict in Iran. Despite the aggressive divestment, the overall value of foreign holdings in Korean equities experienced an increase, primarily driven by a robust rally in the KOSPI index, which saw its value surge past the 6,000-point threshold.

The latest data, detailed in the Financial Supervisory Service’s “February Foreign Securities Investment Trends” report, reveals that overseas investors collectively net sold 19.558 trillion won in listed stocks. The primary focus of this divestment was the KOSPI market, where 19.319 trillion won worth of stocks were offloaded. The secondary KOSDAQ market saw a comparatively smaller net sale of 239 billion won.

This level of net selling represents a dramatic escalation compared to January, when foreign investors recorded a net sale of only 98 billion won. Analysts attribute this sharp increase in selling activity to strategic profit-taking. As the KOSPI index experienced a rapid and substantial bullish trend, reaching unprecedented highs, investors likely moved to secure their gains.

Holdings Grow Despite Record Sales

Remarkably, even with the massive volume of stocks sold, the total value of foreign investors’ holdings in domestic listed stocks actually rose. By the end of February, their cumulative holdings reached an all-time high of 2,025.5 trillion won, marking the first time this figure has surpassed the 2,000 trillion won milestone. This substantial stake now represents 32.6% of the total market capitalization of all listed stocks on the Korean exchanges.

Geographically, investors from the United States remain the largest holders of Korean equities. Despite a net sale of 8.7 trillion won during February, their total holdings amounted to 838.2 trillion won, accounting for 41.4% of the total foreign holdings.

In contrast, investors from Ireland and France were notable net purchasers during the same period. Irish investors acquired 1.4 trillion won worth of Korean stocks, while French investors purchased 1.2 trillion won. Collectively, European investors hold a significant portion of Korean equities, with their total holdings reaching 644.7 trillion won, or 31.8% of the foreign investment portfolio.

Foreign Investment Inflows into Korean Bonds

While equities saw significant outflows, the South Korean bond market experienced a net inflow of foreign capital in February. Foreign investors net purchased 10.691 trillion won worth of domestic listed bonds. After accounting for 3.259 trillion won in maturities, the net investment in bonds for the month stood at a healthy 7.432 trillion won. This influx contributed to an increase in total bond holdings by foreign investors, which rose by 6.8 trillion won to reach 337.3 trillion won compared to the previous month.

The net investment in bonds was predominantly driven by European investors, who led the way with a net investment of 2.7 trillion won. Investors from Asia followed closely with 2.6 trillion won, and those from the Americas contributed 1.3 trillion won. In terms of total holdings, Asian investors held the largest share of Korean bonds at 140.3 trillion won, with European investors holding the second-largest portion at 125 trillion won.