Recently, while KOSPI has been unable to find a direction, going back and forth between ups and downs in a day or two, securities companies are pointing to the return of foreign investors, who have continued to be net sellers for seven months until this month, as a key to the stock market's rebound.
However, while uncertainty about external factors such as the Middle East crisis, movements in international oil prices, and political situations in major countries remain, a rather gloomy outlook was also raised that a full-fledged net buying shift by foreigners will not be noticeable within the next three months.
According to the Korea Exchange on the 4th, foreigners net sold a total of 18.6371 trillion won in the stock market last month. This month, 1.8932 trillion won was sold in the two days until the previous day, and the selling advantage continued this morning as well.
On this day, the KOSPI started on the rise, but as foreigners turned to 'selling' and the selling trend expanded, the KOSPI fluctuated with large fluctuations.
Recently, when KOSPI fell beyond the 6,000 level, foreign selling appears to have been even stronger. From the 6th to the 15th of last month, when KOSPI was down for all 7 trading days, foreigners also net sold every single day, selling a total of 17.98 trillion won.
When the KOSPI rose on the 16th, 19th, and 21st of last month, foreigners also made net purchases of at least KRW 95 billion to KRW 650 billion, but on the contrary, when it fell on the 20th, 22nd, and 26th of the same month, they significantly reduced their net purchases to KRW 37 billion or made net sales of KRW 520 billion and KRW 650 billion.
The tendency for KOSPI to fluctuate depending on foreign supply and demand has intensified.
For this reason, the securities market is waiting for the return of foreigners, that is, the transition to net buying, but it is predicted that at least three more months will have to pass.
Lee Gyeong-soo, a researcher at Hana Securities, issued a report that day and explained, "There are various reasons for the market decline and foreign selling, including high interest rates, semiconductor 'peak-out' (passing the peak), artificial intelligence (AI) bubble controversy, and concerns about the defeat of the ruling party in the U.S. midterm elections. However, the foreign selling in KOSPI has currently become quite entrenched."
In fact, according to the Korea Exchange, foreigners net sold a cumulative 210.465 trillion won from the beginning of this year to the previous day. Of these, excluding January (KRW 149.3 billion) and April (KRW 1.2319 trillion) of this year, a cumulative KRW 153.1454 trillion was sold over the six months from May (-KRW 44.4638 trillion) to last month.
According to this researcher, the KOSPI movement and the direction of foreign supply and demand were similar to the recent ones, observed three times in 2002, 2008, and 2020. At that time, foreigners' buying transition usually occurred after 6 months, and the KOSPI rebound occurred after 3 months.
Looking at his calculation method specifically, based on the time when three conditions were met: โฒ KOSPI's drop of around 25% from its high point โฒ foreigners selling more than 1.5% of market capitalization for 6 months โฒ foreign net selling for more than 5 months, the foreign net buying conversion rates one month and three months later were only 30% and 26%, respectively.
After six months, the net purchase conversion rate reached 57%, and after one year it rose to 94%.
Under the same conditions, KOSPI was seen to have rebounded after staying in the low-point confirmation zone for three months.
Taking this into account, he explained, โThe quantitative conclusion is that the KOSPI rebound and the return of foreign net purchases are likely to take at least three months.โ
However, some expect that with the conclusion of the U.S. midterm elections, which are currently counting votes, some of the uncertainty will be removed and an influx of foreigners will begin.
Lee Sang-yeon, a researcher at Shinyoung Securities, said, โIf the composition of the National Assembly becomes visible after the U.S. election, there is room for the preference for global risky assets to recover due to the easing of political uncertainty.โ
He continued, "In the domestic derivatives market, the shift of foreigners to net buying of futures last week and the expansion of net buying of programs are favorable. This week, it will be important to see whether the pressure on spot selling is eased while foreign futures buying continues."
