KOSPI Surges 11.5% Weekly; Foreigners Net Buy Over 2 Trillion Won

The KOSPI rose approximately 11.5% in a single week, marking a fifth consecutive day of gains, as foreign investors led the market by net buying over 2 trillion won daily starting from the 12th. According to the financial investment industry on the 15th, the KOSPI closed at 6977.94 the previous day, up 2.42% from the 13th. The closing price five business days prior, on the 7th, was 6258.77.

Earlier this month, on the 5th and 6th, volatility was high, with sidecars for buying and selling triggering in succession. Foreigners net sold 5.9016 trillion won worth of shares from the 3rd to the 7th. However, excluding a net sell of 1.4909 trillion won on the 10th, they shifted to buying. The net buying volume the previous day (14th) exceeded 3 trillion won.

Na Jeong-hwan, a researcher at NH Investment & Securities, stated, "The KOSPI rose due to the inflow of net buying from foreigners and institutions." He added, "After the U.S. July Consumer Price Index (CPI) was confirmed, expectations for a rate cut in September strengthened, leading some foreigners to unwind futures and shift exposure to spot." He also noted that dealer delta hedge buying, responding to investors' call option purchases, appears to have partially contributed to the inflow.

Changes in the macroeconomic environment served as the backdrop. The U.S. July non-farm payrolls, announced after market close on the 10th, showed a decrease of 23,000, falling short of the expected 100,000. This figure acted as a factor to ease concerns about rate hikes, leading to expanded psychology favoring risky assets.

Market volatility also subsided. Lee Jae-won, a researcher at Yuanta Securities Korea, pointed out, "Since 2016, there has been a clear negative correlation between the Korea Volatility Index (VKOSPI) and foreigner net buying." The recent VKOSPI stands at 55.26, the lowest level since May 4th when the KOSPI was in the 6900 range; after that date, the KOSPI fluctuated before rising to 9300.

The financial investment industry analyzed that the market's direction next week also depends on the sustainability of foreign buying. Researcher Lee Jae-won stated, "For the KOSPI's upward trend to extend, the return of consistent net buying by foreigners is crucial." He diagnosed that it is difficult to expect individuals to lead buying as they did in the first half due to decreased deposits and renewed increases in margin financing, explaining that recently, strong gains have coincided with foreign net buying and individual net selling, while declines show the opposite flow.

Lee Kyung-min, a researcher at Daishin Securities, viewed next week as potentially exposed to short-term volatility due to the absence of major events like CPI or Big Tech earnings announcements. However, he added, "As volatility such as VKOSPI is calming down, the possibility of a conflict between the U.S. and Iran expanding into a shock severe enough to disrupt market trends is currently limited."