Profit-taking! Foreign investors set a record for selling South Korean stocks, selling 6.8 trillion won in a single day

Global investors sold Korean stocks on Friday at a record scale, taking profits after the KOSPI surged nearly 50% this year.

According to data from the Korea Exchange, foreign funds sold a net 6.8 trillion won (about $47 billion) of KOSPI component stocks during regular trading hours, setting a new single-day net selling record. As a result, the KOSPI index fell 1%, ending its six-day winning streak. Meanwhile, domestic institutions and retail investors showed net buying.

This sell-off in Korean stocks occurred after a rare strong rally. Since the April 2022 low, the KOSPI has surged approximately 170%, outperforming major global markets. This week, the index broke through the 6,000-point mark, and South Korea’s total stock market capitalization temporarily exceeded the combined value of Germany and France, causing unusual trading volume and price fluctuations in overseas-listed ETFs.

Kim Namho, fund manager at Seoul-based Timefolio Investment Management, said the correction was mainly triggered by month-end rebalancing and profit-taking after the sharp rise. He also noted, “The market generally believes Korean stocks are still undervalued, and after this correction, there is still ample room for growth.”

Memory Boom Drives Korea Stocks to Lead Globally

The current bull market in Korean stocks is driven by explosive growth in global memory chip demand. As the primary listing venues for Samsung Electronics and SK Hynix, Korea directly benefits from this memory cycle. Even though market panic over AI-related assets has pressured other regional markets, Korean stocks have largely remained strong.

This week, the KOSPI broke through the 6,000-point threshold. Less than a month after President Yoon Suk-yeol set 5,000 points as a political target, the index’s rise has far exceeded market expectations.

With Korea’s stock market capitalization surpassing that of major European economies like Germany and France, international investors are rushing in. The enthusiasm for Korean assets has led to abnormal trading volumes and price deviations in some overseas-listed Korean ETFs.

Month-end rebalancing combined with profit-taking triggered a record single-day sell-off

Analysts believe this large-scale foreign selling does not signal a trend reversal but is more a technical adjustment. Kim Namho explained that the mechanical rebalancing of the benchmark index at month-end, coupled with profit-taking after the rapid rally, amplified the selling volume on that day.

Notably, during the period of net foreign selling, domestic institutions and retail investors chose to buy on dips, partially absorbing the foreign selling pressure and showing a relatively optimistic outlook on the market’s future. Kim Namho stated, “The mainstream view remains that Korean stocks are undervalued, and this correction does not change the long-term upward trend.”

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