[Edaily Reporter kyoungeun kim ] Although Samsung Electronics has ushered in an era of quarterly operating profits exceeding 100 trillion won, foreign investors have yet to return. The proportion of Samsung Electronics shares held by foreign investors has fallen to levels seen just before the global financial crisis. With retail investors who bought heavily at the peak now forming a thick wall of selling pressure, the prevailing view is that the index will struggle to rebound significantly without a return of foreign capital.
◇Concentration on Memory Chips and Korea-Specific Factors Drive “Exit” Trend
According to the Korea Exchange on the 12th, Samsung Electronics’ foreign ownership ratio stood at 46.35% that day, falling to its lowest level since January 2008, during the global financial crisis. SK Hynix’s foreign ownership ratio also fell below the 50% mark to 49.52%. Both stocks are trading about 6 percentage points below their 52-week highs (52.62% and 55.61%, respectively). Stock prices also trended downward; on this day, Samsung Electronics closed at 250,500 won, down 11,500 won (4.39%) from the previous trading day, while SK Hynix closed at 1,605,000 won, down 76,000 won (4.52%).
The scale of foreign selling is record-breaking. As of today, the cumulative net selling by foreign investors on the KOSPI this year has reached approximately 227 trillion won. Of this amount, about 177 trillion won flowed out in the first half of the year alone. The intensity of selling, which had slowed in July and August, picked up again in September. By stock, selling was concentrated on SK Hynix (87 trillion won) and Samsung Electronics (86 trillion won). This means that 173 trillion won—about 76% of the total net selling—came from large-cap semiconductor stocks.
On the other hand, retail investors absorbed the selling pressure. According to Hana Securities’ data, retail investors’ cumulative net purchases in the KOSPI 7,000–9,000 range totaled approximately 83.6 trillion won. The problem is that these funds could actually become a burden during a market rebound. Kim Doo-eon, an analyst at Hana Securities, noted, “If part of these funds turns into selling as investors recoup their initial losses, the index’s upward momentum could weaken,” adding, “New buying demand must flow in to absorb the pressure at these high-price levels.”
Experts believe it is difficult to explain the outflow of foreign capital, which has continued since the beginning of the year, solely through macroeconomic factors such as high interest rates and high oil prices.
The primary reason cited is the Korean stock market’s reliance on memory semiconductors. Even among other AI beneficiaries, the U.S. has leading stocks spread across AI services and infrastructure as a whole, while Taiwan is benefiting from demand for advanced semiconductors, centered on TSMC. In contrast, South Korea is highly dependent on memory semiconductor earnings. While the KOSPI fell 6.5% over the past month, Taiwan’s Taiex rose 2.8% and the S&P 500 rose 2.1%.
This also highlights how the U.S. stock market is building resilience by diversifying away from an overreliance on AI. Kim Jun-young, an analyst at iM Securities, noted, “While the Philadelphia Semiconductor Index fell 4.3% last week, utilities (4.0%), software (3.9%), consumer staples (3.6%), and healthcare (2.8%) rose,” adding, “The U.S. market is hitting record highs without relying on AI, and capital from the semiconductor sector has shifted to defensive stocks.” In contrast, the domestic stock market—excluding large-cap semiconductor stocks—has seen limited broad-based buying. Last week on the KOSPI, only 298 stocks rose, while 602 fell.
This was compounded by supply-and-demand factors unique to Korea. SK Hynix issued approximately 40 trillion won worth of new shares last July to list American Depositary Receipts (ADRs) in the U.S. This diluted its equity by just over 2%, and the fact that overseas investors can now purchase ADRs directly in the U.S. instead of the domestic shares has led to a dispersion of demand, which is cited as a contributing factor. Speculation about Solidigm’s U.S. listing is also fueling concerns about a holding company-style discount.
Questions also remain regarding the “sustainability” of earnings rather than their “absolute scale.” Analyst Kim Doo-eon explained, “Stock prices are a function of their growth rate,” adding, “After posting record-high earnings, market expectations for how much profits will increase in the next quarter also rise.”
Experts point to macroeconomic variables—such as easing inflation and interest rate pressures—as the first hurdle for the return of foreign investors. The U.S. Consumer Price Index (CPI) for September, to be released on the 14th (local time), will be a key turning point. The market expects the core CPI to rise 0.2% month-over-month, marking a slower pace of increase compared to the previous month (0.3%).
Energy prices are another key factor. If the Russia-Ukraine energy ceasefire is implemented, it could lower expected inflation and the burden of monetary tightening, which would have a positive effect on foreign investor sentiment.
According to an analysis by Hana Securities, during the KOSPI’s bull market, foreign net buying led the U.S. core Personal Consumption Expenditures (PCE) inflation rate by five months. It led the U.S. ISM Manufacturing Index by one month and the yield spread between South Korean and U.S. 10-year government bonds by two months. The analysis explains that macroeconomic factors—such as easing inflation and interest rate pressures, along with a recovery in manufacturing—are the key drivers of foreign net buying in the spot market.
There are also counterarguments that interest rate stability alone is not sufficient. Analyst Lee Jae-won pointed out, “Given that the U.S. stock market has hit new highs despite a high-interest-rate environment, it is not appropriate to set interest rate stability alone as a prerequisite for a rebound in the domestic stock market,” adding, “This must be followed by further upward revisions to earnings forecasts and an improvement in relative attractiveness.”
Earnings announcements scheduled for the end of this month are seen as a short-term inflection point. SK Hynix (on the 27th) and Samsung Electronics (on the 29th) are expected to announce their third-quarter earnings alongside additional shareholder return plans. Analysts in the securities industry predict that details regarding 2027 High-Bandwidth Memory (HBM) supply prices and volumes, as well as additional shareholder return measures, will be revealed all at once during these announcements. They explain that this will be an opportunity to gauge who will fill the supply-demand gap that could arise once share buybacks conclude.
Experts advise investors to monitor changes in supply and demand as well as earnings estimates and adjust their strategies accordingly, rather than making hasty predictions about when foreign investors will return. At the same time, they caution against waiting too long to act. Research analyst Lee Jae-won stated, “The fact that solid fundamentals have been confirmed and the judgment that foreign investors will resume buying Korean stocks are two separate issues,” but added, “If investors react too late after foreign net buying gains momentum, there is a possibility they will miss out on a significant portion of the rebound.”