On Friday when the benchmark Kospi hit a record high, foreigners controlled over 534.1 trillion won worth of local stocks, equivalent to 36.72 percent of the aggregate value of all listed shares, the bourse operator said. This is the highest reached since the 36.73 percent on May 25, 2007.

Foreign ownership has been on the rise from 35.2 percent in late 2016 to 36.6 percent in late April and 36.7 percent last Tuesday.

In contrast, local retail investors and institutions reduced their holdings. Individuals sold off 3.64 trillion won more than they bought, with institutions selling a little under 5.55 trillion won worth of stocks.

"Because South Korean investors sold their stocks, while foreign ones bought shares the main beneficiaries of the recent spike were overseas investors and not locals," a market watcher said.

He pointed out that local investors were net buyers of over-the-counter Kosdaq shares that edged up just 0.6 percent throughout this year, vis-a-vis the 10.6 percent posted for the Kospi.

Of the 1,208 listed firms on the Kosdaq market, 53.2 percent, or 643, had lost ground this year as of Thursday.

Reflecting this, market data showed that local investors were rushing to buy stocks that have already risen in price, with many borrowing money, which can lead to complications down the road.

"The Kospi is likely to reach 2,300 levels this year but gains may be centered on a handful of high-performing companies so it is advisable for investors to be cautious about which stocks they buy," Samsung Securities analyst Oh Hyun-seok said.

He said under such circumstances it is best to abstain from buying up shares indiscriminately in the hope that prices will rise. (Yonhap)