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Foreigners’ net sale of Seoul stocks worth W31tr so far in 2021

S. Korea’s benchmark Kospi logs weakest return among G-20 bourses

While foreign investors extended their selling spree of South Korean stocks, the amount of massively offloaded shares by them so far in 2021 has already surpassed last year’s figure during the pandemic-hit market, data showed Sunday.

Offshore investors sold a net 30.73 trillion won ($26.15 billion) worth of local stocks from the calendar year to Friday, according to data compiled by the Korea Exchange. It marked nearly a 25 percent increase from 24.71 trillion won in net selling for the whole year of 2020.

Except for April when foreigners purchased a net 82.9 billion won from the local stock market, they were net sellers for seven months this year. The value of local stocks they have sold so far in August came to 6.49 trillion won, which was already the second-largest monthly figure after May’s 9.02 trillion won.

In line with the massive foreign sell-offs, the nation’s benchmark posted the weakest return rate this month among main bourses in the Group of 20, according to an analysis by market researcher Infomax.

Kospi’s rate of return stood at minus 4.43 percent as of Friday, putting the bourse at the bottom among 20 major bourses around the world. It gave weaker returns than the main bourses of Brazil (minus 3.08 percent), Japan (minus 0.99 percent) and China (minus 0.87 percent).

Market watchers largely attributed foreigners’ continued exodus from the domestic stock market to the falling value of the Korean won, which stems from the fourth wave of COVID-19 infections and concerns over the possibility of the US Federal Reserve’s earlier-than-expected tapering.

Some analysts have also said that the main bourses of export-driven economies have showed relatively lackluster performances. The Taiwan Stock Exchange Capitalization Weighted Stock index and Hong Kong’s Hang Seng China Enterprises index logged lower return rates than the Kospi this month, at minus 5.25 percent and minus 5.32 percent, respectively.

“What countries such as Korea and Taiwan have in common is foreigners’ massive dumping from their stock markets. The moment is tied to the recent crisis in Afghanistan,” Samsung Securities senior researcher Jeong Myung-ji said. “As global geopolitical tensions grow, stock markets of nations with high dependency on exports are negatively affected.”

Yet some experts have pointed out that Seoul’s recent stock plunge is “too extreme.” Emerging countries also have been suffering from market variables such as tapering jitters, but the domestic market seems to be reacting more adversely in comparison, they said.

“The immediate cause of the falling Kospi index is foreign investors’ enormous sell-offs. However, the local market’s volatility is more excessive than any other nation. It is even greater than when North Korea’s nuclear weapon risks emerged,” said Kim Byung-yeon, an analyst at NH Investment & Securities.

Kim Yong-goo, a Samsung Securities equity strategist, said the Kospi’s 12-month forward price-to-earnings ratio is at 10.9 times. The figure is lower than the level before the pandemic at end-2019 at 11.8 times, showing the index’s fundamental has hit rock bottom.

He further added that the current market correction is more of a hypersensitive reaction of investor sentiment and supply-demand factors leading to extreme undershooting -- a price action where a stock dips below a support level for a short period.

By Jie Ye-eun (