Foreign buying rally sets record

October 17, 2013

By Kim Rahn

Foreign investors have net-purchased Korean stocks for 35 consecutive business days, the longest period ever.

They bought stocks worth 284.5 billion won ($267.4 million), Thursday, the 35th day since they began purchasing them on Aug. 23.

The previous record was 34 days from Jan. 20 to March 3 in 1998.

The total amount of foreign investment for the 35 days was 12.1 trillion won.

On the back of the buying spree, the benchmark KOSPI rose to 2,040.61, up 0.29 percent from its previous close.

The increase came as the U.S. Congress reached a deal on budget and debt ceiling issues, removing uncertainty for the time being.

Analysts said, however, that this can re-emerge as Washington’s possible default issues were not solved but delayed. Despite other minor downside factors, they expect the KOSPI to keep rising and foreign investors to keep buying.

“Foreigners bet on a country’s economic condition. Korea’s fundamentals are relatively strong, showing good fiscal health and a current account surplus, compared to other emerging Asian markets. Korea is attractive to foreign investors,” said Oh Seung-hoon, a researcher at Daishin Securities.

Hyundai Securities economist Ryu Yong-seok also said, “The Korean economy had been dull but turned upward in the second quarter. It is expected to go up for at least one year, so more investment by foreigners is likely.”

Park Se-won of KB Investment & Securities has forecast foreign investors may buy additional stocks worth between 3 trillion won and 15 trillion won.

Analysts expect the KOSPI to rise to 2,150-2,200 by the end of the year and a little more through the first quarter of next year.

They said the U.S. Federal Reserve is unlikely to begin tapering its quantitative easing programs soon, and with the weak dollar, investors will keep buying non-dollar assets including Korean stocks.

Some other downside factors remain but may not be powerful enough to curb the upward trend, according to the analysts.

“China is showing signs of recovery, but we are not sure how strong that will be. But it seems certain that the country has got out of the downturn and the upturn will continue through the first half of next year,” Oh said.