Year-end inflow to Korean main bourse sign of foreigner comeback?

Foreign investors are poised to extend their buying spree in South Korea’s main stock market to a sixth straight session, spurring hopes for their comeback.

Foreigners bought a net 122.5 billion won ($104.2 million) on the main Kospi early in the morning on Dec. 8, according to Korea Exchange data. They absorbed a combined net 2.2 trillion won in the previous five consecutive sessions, the data showed. In November, they purchased a net 1.9 trillion won.

Foreign investors have also bought a combined net 13,966 contracts of Kospi 200 futures so far this month.

Stock market players are keeping close watch on trading in the run-up to Thursday, Dec. 9 when contracts of futures and options expire to gauge further foreign demand for Korean shares.

SAMSUNG ELEC, SK HYNIX SEE $3.4 BN INFLOWS

Chipmakers, game developers and battery producers enjoyed foreign stock inflows. Their two top picks were Samsung Electronics Co. and SK Hynix Inc. Foreigners bought a net 2.1 trillion won in Samsung’s shares and 1.9 trillion won in SK Hynix in total as of Dec. 6 since November. They purchased a combined net 698.6 billion won in Krafton Inc., 456.1 billion won in Kakao Corp. and 432.2 billion won in Kakao Games Corp during the period. Samsung SDI Co. and SK IE Technology Co. also saw inflows of 420.9 billion won and 279.8 billion won, respectively.

Such purchases indicated that foreign investors turned bullish on South Korea’s semiconductors and information technology sectors, which had suffered from massive sell-offs on worries about the global chip industry, some market experts said.

“Foreign investors may have seen earlier worries about a peak-out excessive, given the recent upgrade in target prices of the global semiconductor shares such as Micron Technology, as well as a surge in those stocks,” said Plain Vanilla Investment Advisor head Kim Kyung-sik.

“Korean companies enjoyed inflows as Wall Street has not seen ‘a winter’ in the semiconductor industry.”

WILL FOREIGNERS ROLL OVER FUTURES CONTRACTS?

Still, it is premature to expect foreign investors to continue their buying spree, other analysts said.

The recent stock inflows were more likely an unwinding of bearish bets rather than a trend change since most of the purchases were made by active funds, indicating foreigners may have just covered their short positions after massive short selling, KTB Investment & Securities Co. said.

In the first ten months of the year, foreign investors dumped a combined net 30.7 trillion won in shares, limiting the upside in the Kospi.

Analysts will pay close attention to whether foreign investors will roll over their Kospi 200 futures contracts on the Dec. 9 expiry day. A massive rollover of contracts would suggest a return to the country’s stock market.

Currently, foreign investors were estimated to hold about 77,000 contracts of Kospi 200 futures long positions, assuming expiring contracts will be rolled over, according to the local brokerage industry.

“Foreigners’ long positions in the futures have topped levels of December last year,” said Shinhan Investment Corp. analyst Noh Dong-gil. “A massive rollover amid strong demand in the spot stock market will indicate their (bullish) bets on the index. It will rise until early 2022.”

The Kospi rallied in the first quarter after foreigners bought both spot stocks and futures in December of last year.

Write to Ji-Yeon Sul at sjy@hankyung.com
Jongwoo Cheon edited this article.