October 25, 2024

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Electronic board at a dealing room of the Hana Bank headquarters in Seoul shows the Kospi starting at 2,524.78 points on Wednesday. (Yonhap)

Foreign investors are on a massive selling spree of South Korean stocks, dumping shares worth over 3 trillion won ($2.25 billion) on the benchmark Kospi this month, fueled by concerns that the US could be heading toward a recession.

Overseas investors sold off shares worth 3.11 trillion won on the Kospi in the first seven trading days in September, continuing the sell-off stance from last month. In August alone, foreign investors dumped shares worth around 2.7 trillion won on the bourse, according to bourse operator Korea Exchange.

Amid this major shedding, the Kospi stood at 2,508.86 as of 2 p.m. Wednesday, losing 14.57 points or 0.58 percent from the previous trading day. Secondary bourse Kosdaq gained 6.22 points or 0.88 percent, reaching 712.42.

The strong sell-off by overseas investors strikes a contrast with their net buying stance earlier this year. Foreign investors net-bought shares worth 22.9 trillion won on Kospi in the first six months of this year, setting a record since related data started to be compiled in 1988.

Yet in the recent net-selling trend, foreign investors have ditched chip shares, including the stock of market bellwethers Samsung Electronics and SK hynix.

From Sept. 3 to Tuesday, foreign investors sold off 2.69 trillion won shares of Samsung Electronics and 658 billion won of SK hynix, bringing down the stock prices by 11 percent and 10.6 percent, respectively, during the period.

Samsung Electronics continued its losing streak on Wednesday. Its shares fell to a 52-week low, hitting 64,300 won during intraday trading as of press time. It was the lowest figure seen since Oct. 6 last year.

The tech giant's shares have been experiencing the worst days this year with its market cap dropping below 400 trillion won during intraday trading on Monday. It was the first time since October last year that the figure dropped below the bar. The company's market value stood at 383.85 trillion won as of press time.

Reflecting such woes, securities firms are slashing the target price for Samsung Electronics to around 95,000 won, lowering the expectations from the previous price band between 105,000 won to 130,000 won. The cuts also reflect the projection that the tech giant’s third-quarter earnings may be weaker than the market forecasts.

The upcoming rate decision by the US Federal Reserve is expected to affect the local stock market, as it is categorized as an emerging market.

While the US Fed has kept the base rate steady between 5.25 and 5.5 percent for over a year, it is projected to cut the rate at the Federal Open Market Committee meeting Sept. 17-18.

As of Wednesday, the CME Group's FedWatch tool indicated a 69 percent chance that the US Fed would cut the base interest rate by 25 basis points at its upcoming meeting, while 31 percent speculated a 50 basis points cut.

Though the rate cut was expected to favor emerging market countries, including Korea, some view that the potential cut could hinder capital inflow as it would reflect concerns the US economy is slowing down.

"Foreign investors' selling spree is likely to continue for a while," economist Jeong Yong-taek from IBK Securities said. "Considering that the appeal for safe-haven assets would have to end for foreign investors to raise their stake in the Korean market, they are likely to maintain a 'sell' or 'underweight' stance."

By Im Eun-byel (silverstar@heraldcorp.com)