View financial news and market trends on East Money, choose East Money Securities for one-stop account opening and trading. Foreign capital has been continuously selling off. Today, the South Korean stock market rebounded significantly. As of the close, both the South Korean Composite Index and the KOSDAQ Index for startups rose by more than 2%. This marks the first increase in the stock market since the country plunged into political turmoil due to the martial law order last week.
However, data indicates that foreign capital had already been fleeing the South Korean stock market before this round of political unrest. According to official South Korean data released today, foreign investors net sold 4.154 trillion won (approximately 21 billion RMB) in the South Korean stock market in November, marking four consecutive months of net selling of South Korean stocks by foreign investors.
The ‘November Foreign Securities Investment Trends’ released by the Financial Supervisory Service of South Korea shows that foreign investors net sold 4.154 trillion won in the South Korean stock market last month, continuing the net selling for four consecutive months. At the same time, foreign investors bought 1.48 trillion won (approximately 7.5 billion RMB) worth of bonds.
From a regional perspective, the net selling scale in the Americas, Europe, and Asia was relatively large, exceeding 1.6 trillion, 900 billion, and 500 billion won, respectively. In terms of countries, the United States, Luxembourg, and Singapore ranked top three in net selling, selling off 1.39 trillion, 668 billion, and 549 billion won worth of stocks, respectively. The continuous of the South Korean stock market and the ongoing selling by foreign investors may partially explain the recent performance of the South Korean stock market.
In fact, before the recent political turmoil in South Korea hit the stock market, the South Korean stock market had already entered an adjustment phase. The South Korean Composite Index has been adjusting since July and has fallen for five consecutive months. As of the time of writing, the South Korean Composite Index has fallen by more than 13% since July, and the KOSDAQ Index has fallen by more than 20%.
On December 9th, the KOSDAQ Index even hit a new low since April 24, 2020.
In terms of individual stocks, major stocks such as Samsung Electronics and Posco have seen significant declines in their stock prices. Analysts indicate that the South Korean market has a high concentration, with the information technology sector accounting for 35.7% of the weight, followed by industry and finance. The aforementioned three sectors account for about two-thirds of the index’s market value.
Therefore, the fluctuations of major stocks have a more pronounced impact on the South Korean index. The continuous decline of Samsung Electronics has significantly dragged down the South Korean stock market, with Samsung Electronics’ stock price falling by 32% this year. The impact of South Korea’s economic fundamentals on the stock market is even more direct. As an economy highly open to foreign trade, South Korea’s trade dependence has been above 70% for many years, with export advantages in areas such as semiconductors, petrochemical products, and automobiles.
Since 2024, although South Korea’s chip exports have maintained relatively fast growth, the country’s export growth rate has shown a fluctuating downward trend due to weakening external demand. This decline in export growth has dragged down South Korea’s real GDP (Gross Domestic Product) growth rate from 3.3% in the first quarter to 1.5% in the third quarter of 2024, indicating a certain degree of economic weakness.
The possibility of the newly elected US President Trump imposing tariffs on South Korea also has a psychological impact on investors. According to strategist Li Qingmin from Da Xin Securities, with the increase in domestic political uncertainty in South Korea, investors should be prepared for a surge in short-term market volatility. The possibility of the worst-case scenario for the South Korean Composite Index has risen, and continuous declines may cause fluctuations due to market fatigue, disappointment, extremely low investor sentiment, and supply and demand conditions.
In order to boost the stock market, the South Korean government has made a series of efforts since last year, including banning short selling, establishing a stock market stabilization fund, and planning to eliminate discount phenomena through capital market reforms, such as abolishing capital gains tax and enhancing corporate value, with the intention to emulate the corporate governance proposed by the Tokyo Stock Exchange last year.
However, the continuous departure of foreign investors may diminish the effectiveness of the South Korean government’s policies to stimulate the stock market. To trade stocks, open an account first! Choose Dongfang Fortune Securities, and manage your market transactions with just one app.