Foreigners offload 117 trillion won even as Kospi tops 8,000; won-dollar rate surges past 1,540
Foreign investors sell for 20 consecutive trading days; exchange rate hits post-financial-crisis high
Kospi plunges in 'Black Friday' selloff as foreign exodus threatens 8,000 threshold
Fears grow over prolonged won weakness as rate above 1,500 shows no sign of retreating
The Kospi has entered the historic 8,000-point era for the first time, but a massive flight of foreign capital is deepening market anxiety. Foreign investors have net sold nearly 120 trillion won worth of shares this year and have now recorded net selling for 20 consecutive trading days, marking an unprecedented exodus from Korean equities.
The selloff, concentrated in large-cap semiconductor stocks, sent the Kospi plunging in early trading Friday, threatening the 8,000 threshold in what markets described as a "Black Friday." The won-dollar exchange rate also surged past 1,540 won, extending its elevated run. Sustained foreign selling and a soaring exchange rate have stoked anxiety across both the stock and currency markets at the same time.
According to Korea Exchange, foreign investors net sold a total of 116.6 trillion won worth of Kospi-listed shares — excluding exchange-traded funds — from the start of the year through Thursday. The pace of selling accelerated sharply in the most recent month: from May 4 through Thursday, foreigners net sold 60.6 trillion won.
The selling was concentrated in the large-cap semiconductor names that anchor the Korean market. This year, foreign investors net sold 60.2 trillion won worth of Samsung Electronics shares and 40.8 trillion won worth of SK Hynix shares. Together, the two stocks accounted for 101 trillion won in net selling — the vast majority of total foreign outflows.
The net selling continued Friday. As of 1:50 p.m., foreigners had net sold approximately 3 trillion won. If the trend holds through the close, it will mark 20 consecutive trading days of net selling — the ninth-longest such streak on record.
The Kospi opened down 316.21 points, or 3.66 percent, at 8,323.20 and extended its losses through the session. A sidecar — a temporary suspension of program sell orders — was triggered shortly after the open. As of 1:50 p.m., the index was trading at 8,208.17, down 4.99 percent from the previous session. At one point it fell as low as 8,038.10, bringing the 8,000 level under threat.
The decline was sharpest in the semiconductor heavyweights that foreign investors have been selling most aggressively. Samsung Electronics fell 4.98 percent, dropping into the 330,000-won range, while SK Hynix slid 8.01 percent into the 2.1 million-won range. SK Square, SK Hynix's largest shareholder, also fell 8.01 percent.
The Kosdaq also briefly broke below the 1,000-point mark during the session. The index opened down 14.51 points, or 1.38 percent, at 1,035.22 and widened its losses. As of 1:50 p.m., Kosdaq was trading at 1,007.52, down 4.02 percent from the previous close, after touching an intraday low of 992.80.
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Market participants say the current wave of foreign selling is nearly without precedent — both in scale and in duration. Foreign investors recorded 19 consecutive trading days of net selling on the Kospi from May 7 through Thursday, the longest such streak in roughly six years. The previous record was set during the COVID-19 shock, when foreigners sold for 30 consecutive trading days from March 5 through April 16, 2020.
The daily volume of selling has also been record-breaking. On Thursday, foreign net selling on the Kospi totaled 6.9880 trillion won, the second-largest single-day figure on record. The all-time record was also set this year: on Feb. 27, foreigners net sold 7.0812 trillion won.
As foreign capital continues to flee, the won-dollar exchange rate has climbed steeply. The rate opened Friday's Seoul foreign exchange session at 1,529.0 won per dollar, down 0.7 won from the previous session, before surging past 1,540 won during trading.
Growing concern in the market centers on the risk of a vicious cycle in which foreign selling and a rising won-dollar rate feed each other.
Foreign investors ultimately measure their returns in dollars, not won. When the won weakens and the exchange rate rises, currency losses can erode gains even when share prices advance. If the won falls far enough, dollar-denominated returns on Korean equities can turn negative even as the Kospi rises. When the exchange rate enters an upward phase, foreign investors tend to reduce their exposure to Korean stocks or pull out their capital altogether. Analysts say the recent concentration of foreign net selling in top market-capitalization stocks such as Samsung Electronics and SK Hynix is already dampening broader investor sentiment toward won-denominated assets.
The problem is that foreign selling itself adds upward pressure on the exchange rate. When foreign investors sell Korean shares and repatriate the proceeds, they convert won into dollars, increasing demand for the US currency in the foreign exchange market. That additional dollar demand pushes the rate higher, which in turn makes Korean equities less attractive to foreign investors — a self-reinforcing loop.
In practice, the foreign net selling streak and the elevated exchange rate have been lengthening in tandem. The foreign net selling run extended to 20 consecutive trading days Friday, while the won-dollar rate has closed above 1,500 won for 13 consecutive trading days.
"Foreign buying and selling flows have long been one of the most important drivers of exchange rate movements in our financial markets, given how large a presence foreign investors have — but since mid-May, the daily net selling volume has surged sharply to around 3 trillion won," said Jeong Yong-taek, a researcher at IBK Investment Securities. "These factors do not look likely to disappear anytime soon."
th5@heraldcorp.com
