Foreign investors’ buying binge of South Korean stocks, backed by expanded global easing policies, has helped send the country’s stock market more than 11 percent higher this year, with their net buying reaching some 5.4 trillion won ($4.9 billion), data showed on Sunday.
According to the data compiled by the Korea Exchange, foreign investors have snatched up local stocks worth a net 5.38 trillion won this year through Friday.
Fueled by the foreign buying spree, the country’s key stock index, the KOSPI, has rallied 11.9 percent this year to close at 2,143.50 points on Friday.
Analysts said global easing policies sought by major and emerging countries, coupled with improving corporate earnings outlooks, have prodded offshore investors to pour more money into risky assets such as stocks.
Also, South Korea’s stock market has been undervalued compared to its rivals, which is why investors are pumping more money into the local stock market.
“What we have seen recently on the market, I can say, is definitely backed by ample liquidity,” said Kang Hyun-chul, an analyst at NH Investment & Securities. “Foreign investors are increasingly confident that South Korean firms’ earnings would sharply improve.”
Foreign investment banks are upgrading their outlooks for the country’s stock market, with some forecasting the KOSPI to hit the 2,300-point level this year.
Analysts, however, are split over whether the recent rally will last down the road, as the U.S. Federal Reserve is still on a course toward raising borrowing costs and Greece’s possible exit from the eurozone economy could dampen investor sentiment, which would reduce bets on risky assets.
“The current influx of foreign capital (into South Korea) is part of their asset reallocation in emerging markets,” said Rhyu Seung-min, an analyst at Samsung Securities. “Foreign investors’ buying could slow down if their asset rebalancing is completed.” (Yonhap)
