Foreign investors demonstrated a dual strategy in South Korea’s financial markets this month, becoming net sellers of stocks on the main bourses while simultaneously increasing their net purchases of exchange-traded funds (ETFs) amidst ongoing market volatility, according to the country’s bourse operator on Sunday.
Through Thursday of this month, overseas investors divested a significant net 12.1 trillion won ($8.12 billion) from the benchmark KOSPI, South Korea’s primary stock market. Additionally, they offloaded 338.1 billion won from the tech-focused secondary market, KOSDAQ, as reported by the Korea Exchange (KRX).
The KRX further noted that foreign entities were net sellers on the main KOSPI index in eight out of 12 trading sessions last week. The South Korean market was closed on Friday in observance of Constitution Day.
In a contrasting move, foreign investors actively acquired 593.7 billion won worth of ETFs during the same period this month, marking net purchases in 10 of the 12 trading sessions, indicating a strategic shift towards these diversified investment vehicles.
Among the most favored ETFs by foreign investors was the KODEX Leverage, which mirrors twice the daily performance of the flagship Korea Composite Stock Price Index (KOSPI). This particular ETF saw net purchases totaling 195 billion won. Following closely was the KODEX 200, another popular ETF tracking the broader KOSPI index, with 180.6 billion won in net buys.
Conversely, foreign investors turned into net sellers of single-stock leveraged ETFs. This included offloading 79 billion won worth of an SK hynix leveraged ETF managed by Samsung Asset Management Co., alongside 46.4 billion won from a similar product overseen by Mirae Asset Global Investments Co.
“Foreigners appear to be strategically investing in various ETFs to mitigate risk within their diverse portfolios, rather than making outright directional bets on the broader market,” commented a seasoned market analyst.
In response to the heightened market volatility in South Korea, the government last week introduced new regulatory measures concerning leveraged ETFs. These measures include an increase in the minimum deposit requirement for investors looking to trade single-stock leveraged ETFs, raising it to 30 million won from the previous 10 million won.
