Foreign Investors Returning to Korean Bourse

Foreign investors, who were responsible for the tailspin of Korean share prices last year, have begun buying up massive amounts of cheap Korean stocks in the New Year. In Monday’s trading, foreign investors net bought for the fourth-consecutive day, driving the KOSPI up 1.4 percent.

Foreign investors sold W36 trillion (US$1=W1,314) worth of Korean stocks last year but started snapping up bargains in December, net buying W880 billion worth that month alone. During this year's two days of trading -- Jan. 2 and 5 -- foreign investors net bought close to W400 billion worth of Korean shares. Powered by foreign investor buying, the exchange rate is also inching down. On Monday, the won finished trading at W1,313.50 against the U.S. dollar, down W7.50, and the country's foreign reserves increased for the first time in nine months.

This trend has also led to hope of an end to the vicious cycle of stock selloffs by foreign investors, weakening of the won, drop in Korea’s national credibility and more selling by foreign investors.

Foreign investors are not just buying Korean shares. According to Daewoo Securities, they are also snapping up shares in Taiwan, India, Indonesia and other emerging countries. Woo Young-moo, a director at Prudential Investment and Securities, said global stock markets have been moving according to very similar patterns over the last six months.

But if the global stock market gains are merely a bear market rally, namely short-lived rises amid weak conditions, foreign investors could cash out of Korea any time. That is why experts are cautious in saying for certain that foreign investors had turned into net buyers again.