Foreign Investors Dump 4.9 Trillion Won in Net Stock Sales Over Two Days
Foreign investors net sold 4.9 trillion won ($3.5 billion) worth of stocks over just two days, reigniting the "Sell Korea" phenomenon of foreign capital flooding out of the market. Foreign investors had been buying stocks through early September on AI-related optimism, but turned to large-scale net selling on the Korea Exchange on Sept. 10-11.
What upended the market, however, was the Middle East. Yemen's Iran-backed Houthi rebels seized a string of strategic locations around the Bab el-Mandeb Strait at the entrance to the Red Sea, fueling concerns that crude oil exports through the Red Sea could be blocked in addition to the Strait of Hormuz. International oil prices breached the key psychological threshold of $100 per barrel, while the yield on the benchmark 10-year U.S. Treasury bond climbed to just below the 5% annual mark.
Remarks by U.S. President Donald Trump also stoked market jitters. On the 9th, en route to the Republican midterm convention, Trump told reporters the war would end as soon as the November U.S. midterm elections were over. He then pledged at the Republican convention on the 10th that if the GOP wins the midterms, each American adult would receive $5,000 (roughly 7 million won). U.S. federal debt surpassed $40 trillion (about 53,500 trillion won) for the first time in history last month. With an annual budget of around $7 trillion, paying $5,000 to 250 million adult citizens would cost roughly $1.25 trillion on a simple calculation.
Macro shocks appear to be overwhelming fundamentals. Oracle announced early on the 11th, Korea time, that its cloud infrastructure (OCI) revenue in the first quarter of fiscal 2027 (June-August) surged 120.7% from a year earlier, yet Korean semiconductor stocks plunged.
The U.S. Federal Reserve's rate decision is viewed as the biggest variable for markets this week. Lim Jeong-eun, a researcher at KB Securities, said, "Caution is mounting ahead of the release of U.S. August consumer price data, and the Federal Open Market Committee (Sept. 16-17) and the Bank of Japan's monetary policy meeting (Sept. 17-18) are being held back to back this week. This is a time when investors need to pay attention to macro sensitivity and market volatility depending on the outcomes of these events."
Samsung Electronics and SK hynix are propping up the bottom of the KOSPI by buying back large amounts of their own shares for employee stock compensation and cancellation purposes. In fact, about a month after the Iran war broke out in April-May this year, global capital flooded into semiconductor and AI infrastructure stocks with clearly improving earnings. Kang Dae-seung, a researcher at SK Securities, said, "With rising oil prices and Treasury yields triggering simultaneous shocks, AI-related stocks should have weakened while value stocks held up relatively better, but the market actually moved in the opposite direction. Semiconductors are expected to stay relatively strong, driven by the declining appeal of other sectors."
