Foreign investors dump W8tr from Seoul bourse

Foreign investors kept bailing out of the Korean market in massive droves, selling nearly a net 8 trillion won in the first eight months of this year, statistics compiled by the Korea Exchange showed.

Market experts say foreign investors are likely to continue discarding Korean equities amid concerns over a slowing local economy and less than stellar earnings performance by the nation`s leading exporters.

From the May to August period alone, foreigners unloaded 10.24 trillion won worth of shares. The total net selling, after purchase and changing of hands, amounted to 7.96 trillion won from the January to August period.

Foreigners sold Samsung Electronics Co. shares worth 2.79 trillion won most heavily. The leading exporter accounts for nearly 10 percent of the Seoul bourse`s market capitalization. POSCO was the next most heavily discarded share at 1.25 trillion won. Others included KT&G Corp. (835.5 billion won), Hyundai Motor Co. (612.4 billion won) and Woori Financial Group (542 billion won).

Foreign capitals based in Britain, the United States and Singapore withdrew most heavily, with British and American investors cashing out 4 trillion won and 3 trillion won each. The U.S. withdrawal - by those classified as "long-term investors" - lessened in July to 515.3 billion won from 1.9 trillion won and 1.5 trillion won in May and June.

In contrast, local institutional investors led the market on its seven-month purchasing spree since February, buying a total of 6.93 trillion won since.

Foreigners were responsible for 28.27 percent of the daily average trading volume in August, down from 32.44 percent in June. Orders made by local institutional investors accounted for 23.35 percent of the average daily trading volume in August, up from 14.46 percent in January.

Retail investors, usually the ones most responsible for changing of hands on the exchange, were less active; retail orders took up 44.42 percent of the total trading last month, significantly down from 65.55 percent earlier this year in January. Retail investors net-sold 2.39 trillion won worth of shares this year.

"A couple of months back, we were thinking that the foreigners were about done selling, but they still keep on selling. I think there may be structural changes in emerging markets` capital allocation," said Ahn Seung-won of UBS Securities Pte Ltd.

Foreign selling is expected to continue indefinitely on worries over economic slowdowns in both Korea and the United States, other experts say.

"Employment and wage figures are not looking good. Consumer sentiment and household budget surplus are looking limp. We have downgraded Korea`s gross domestic product from the previous 5.25 percent to 4.8 percent this year, and from 4.75 percent to 4 percent for fiscal 2007," said Lim Tae-sup, a senior strategist at Goldman Sachs Group.

The benchmark Korea Composite Stock Price Index could tip the 1,400-level, spurred by short-term macro and micro factors; however, main economic indicators will show that the slowdown of the global economy, and of Korea, is an ongoing deal, he added.

"Foreigners have been selling since October 2004. A cyclical increase of capital inflow is expected after the fourth quarter this year, and there is a high probability that the local market will enjoy the foreign capital injection then," said Ahn Sun-young, an analyst at Mirae Asset Securities Co.

Korea accounted for 1.3 percent of the Morgan Stanley Capital International index as of July, and 17.7 percent of the benchmark index`s Emerging Market Fund, the largest among emerging market nations included in the index.

The KOSPI was up 3.93 or 0.29 percent to close at 1,356.67 on Friday. Foreigners sold shares worth 1.21 trillion won, and retail investors 3.5 billion won. Institutional investors bought 1.02 trillion won, singularly holding up the market.

(jpark731@heraldm.com)





By Park Jung-youn