Foreign Investors Fear Korea’s Stock Exchange Market
European investors are bailing out of the Korean market, selling their stocks to gain profit amidst the country's unstable economy. It has been six years since stocks owned by foreign investors haven't performed well.
Data from Korea Exchange has shown that the Korean Securities Dealers Automated Quotations (KOSDAQ) and Korea Composite Stock Price Index (KOSPI) shares of foreign investors have a combined market value of 428.9 trillion won ($368.5 billion) in July. This accounts for 29.2% of total capitalization, marking a six-year low since August 2009 when the value percentage was 28.9%. While it has increased since November 2010 at over 30%, it has dipped again at 29.7% since the past two months.
The net sales of foreign shares in the stock market have been valued at 389 billion won ($334 million) in June and 2 trillion won ($1.7 billion) in July. European shares, on the other hand, have net sales worth 2.9 trillion won ($2.5 billion) in June and 2.6 trillion won ($2.2 billion) last month. These mostly feature short-term investments on hedge funds in specific destinations, which mean they are greatly affected by interest and foreign exchange rates.
This is the case in the Korean stock market. As the exchange rate between the won and dollar quickly increases - over 1,170 won at the end of July, foreign investors make an exit as well. They're currently selling their shares, afraid that they might lose big time. But the rising exchange rate, which hasn't happened in the past three years, isn't the only problem. Major companies have also performed poorly in Q2 2015, making investors fear the worse.
