Foreign investors once sold Korean stocks sharply in May and June. (AP)
[Compiled by Wei Guojin/Taipei Report] South Korea's Chosun Ilbo reported that foreign investors have sold off Taiwanese and Korean stocks this year. However, the weakness of the Korean won, the threat of China's memory, and the lack of domestic investors to take over after the buyback of treasury stocks have resulted in foreign investors selling Korean stocks more than four times that of Taiwanese stocks in terms of market capitalization. From this year to the 12th of this month, the amount of overselling by foreign investors accounted for 3.8% of the market value of the Korean stock market, while that of the Taiwan stock market was 0.9%.
The report pointed out that data from the Korea Exchange showed that as of the 12th, foreign investors had sold Korean stocks by 199.1 trillion won (NT$4.79 trillion) this year, and sold Taiwan stocks by more than 68 trillion won (NT$1.43 trillion). Compared with the total market capitalization of the day, the oversold amount accounted for 3.8% of the Korean securities market and 0.9% of the Taiwan stock market respectively.
The difference in foreign capital overselling is reflected in the index. On the 13th, the Korean stock index KOSPI has risen 43.2% this year, lower than the 66.9% of Taiwan's weighted index. On June 22, the KOSPI reached a record high of 9114.55 points. It has increased by 116% this year, which is nearly twice the 65% increase of the Taiwan stock market. However, after the Taiwan stock market overtook the Korean stock market for the first time at the end of July, the two indexes showed a tug of war. It was not until September 29 that the Taiwan stock market once again surpassed the KOSPI of 63% with a 64.5% increase. Since then, the gap has widened.
According to the report, one of the reasons why foreign investors are selling Korean stocks is that the Korean won is difficult to strengthen further. From June 30 to the 12th of this month, the Korean won rose from 1,549.4 won to 1,335.1 won against the U.S. dollar. When the Korean won appreciates, foreign investors will convert the proceeds from the stocks they sell into U.S. dollars. Because the Korean won rises, they can exchange the same won for more U.S. dollars.
However, the Korean won's appreciation rate dropped from 8.8% in July to 0.6% on the 13th of this month, leaving few opportunities for foreign investors to earn huge exchange differences, which in turn caused them to sell Korean stocks before the Korean won depreciated again. However, the exchange rate of the Taiwan dollar against the U.S. dollar has not fluctuated much since the end of June last year, so there is little motivation for foreign investors to sell in order to gain gains from the exchange difference.
China's threat to South Korea's semiconductor industry is also one of the reasons why foreign investors have sold off Korean stocks and even Taiwanese stocks. Memory giants Samsung Electronics and SK Hynix account for more than half of KOSPI's market value. China's Changxin Memory announced on the 10th that it has made a major breakthrough in DRAM technology and plans to launch a new DDR5 server memory chip using the 4F² architecture before the end of this year. This progress is two years ahead of Samsung and SK Hynix, triggering shocks in global semiconductor stocks and stock markets. Samsung's stock price fell 7.39% on the 13th, and SK Hynix fell more than 10%.
However, looking back at Taiwan, TSMC, the world's leading foundry, accounts for 40% of the market value of Taiwan's weighted index. TSMC produces chips for companies such as Huida. It faces less direct competition from Chinese companies in advanced manufacturing processes. TSMC's stock price fell only 1.97% on the 13th.
