Foreign investors have rattled Korea's stock market with consecutive days of historic selling, offloading a net 11.1 trillion won ($7.6 billion) from the KOSPI between January 2 and 6, with only one day of net buying (January 3, at 717 billion won).
Market analysts attribute the massive sell-off to a convergence of skepticism over major U.S. Big Tech companies' astronomical artificial intelligence investment plans and profit-taking moves.
The KOSPI closed at 5,089.14 on January 6, down 74.43 points (-1.44%) from the previous session. The index swung wildly within a 221.47-point range during the day, with domestic retail and institutional investors defending the lower bound by net purchasing 2.17 trillion won and 959.7 billion won respectively.
Foreign investors led the decline, selling 3.32 trillion won worth of KOSPI stocks on January 6 alone, following a 5.04 trillion won sell-off the previous day. The selling concentrated heavily on semiconductor stocks, the market's top performers by market capitalization. Samsung Electronics (005930.KS) and SK hynix (000660.KS) bore the brunt, with foreigners net selling 5.06 trillion won and 4.73 trillion won respectively this month. Other major targets included SK Square (-464.4 billion won), Hyundai Motor (-395.9 billion won), Hanwha Aerospace (-258.3 billion won), and Kakao (-176.3 billion won).
Samsung Electronics and SK hynix closed at 158,600 won (-0.44%) and 839,000 won (-0.36%) respectively.
"Foreign investors take a global approach including emerging markets like Korea, so this appears to be portfolio reallocation for risk-off purposes," said Kim Tae-hong, CEO of GrowthHill Asset Management. "The fact that both Big Tech companies like Meta and Amazon and Korean semiconductor firms like Samsung are all in the AI category played a role."
Korea's stock market posted the highest short-term gains globally this year, with the KOSPI up approximately 23% year-to-date, making it the top priority for profit-taking among foreigners who had increased their emerging market exposure.
The strong dollar has also fueled selling pressure. The won-dollar exchange rate surged to 1,475.25 won intraday before closing at 1,469.5 won, up 0.5 won from the previous day.
Renewed concerns over AI investment overheating have added to selling pressure. While Big Tech companies like Amazon have announced massive spending plans, questions about profitability relative to expenditure have revived "AI bubble" theories, spreading disappointment from U.S. Big Tech to Korean semiconductor stocks.
"Corrections are occurring due to concerns over excessive investment by U.S. Big Tech companies, and Samsung Electronics and SK hynix are bound to be affected as beneficiaries of that investment," said Kim Hak-gyun, head of research at Shinyoung Securities.
Markets expect volatility to persist through the Lunar New Year holiday in the short term and through January in the longer term.
"Even the U.S. Nasdaq fell 10.5% during the semiconductor rally in February 2018, so the Korean market appears to be in a temporary correction," said Park Se-ik, CEO of Chesley Investment Advisory. "Considering the holiday effect where Korean stocks have shown weakness before Lunar New Year, we expect weakness through this month with a rebound catalyst likely from March."
However, analysts caution against interpreting the heightened volatility as a signal of sustained decline. Ko Tae-bong, head of research at iM Securities, said, "Korean semiconductor companies have demand secured through 2027 with earnings support, so they won't collapse easily. ETF fund flows are also favorable. The market will likely fluctuate around the 5,000 level for the time being."