Foreign investors sold 57.5 trillion won of Korean stocks in June, up from 48.9 trillion won in May, according to the Korea Financial Investment Association. The USD-KRW exchange rate has remained above 1,500 for over a month, reaching its highest level in 17 years since the global financial crisis. The accelerated outflows coincided with MSCI's decision to reject Korea's inclusion in its developed market index watchlist, citing concerns about liquidity during extended trading hours. South Korea launched 24-hour forex trading to improve market accessibility. Bank of Korea Deputy Governor Jang Jung-soo stated on the 24th of last month that improved systems were not perceived as sufficient by the market.
Foreign Investors Sold 57.5 Trillion Won in Korean Stocks in June
Foreign investors sold 57.5 trillion won of Korean stocks in June, expanding outflows from 48.9 trillion won in May, according to data from the Korea Financial Investment Association. The selling continued into the current month. Portfolio rebalancing demand was identified as the primary cause, as Korea's weight in global indices naturally increased following sharp short-term gains in domestic stocks, prompting passive funds to reduce holdings to original allocation levels.
The USD-KRW exchange rate remained above 1,500 for over a month, marking the highest level in 17 years since the global financial crisis. Foreign exchange supply and demand related to stock sales were cited as a major factor driving the exchange rate higher, particularly during May and June.
MSCI Rejected Korea's Developed Market Index Inclusion
MSCI rejected Korea's inclusion in its developed market index watchlist. South Korea had consistently pursued inclusion by improving foreign investor market accessibility. The infrastructure work included expanding forex market trading hours to 24 hours.
MSCI questioned whether sufficient liquidity exists to handle large orders with narrow spreads during early morning hours. The index provider indicated that active trading during extended hours matters more than simply keeping markets open longer. Bank of Korea Deputy Governor Jang Jung-soo stated on the 24th of last month during a financial stability report briefing that "improved systems appear to have been evaluated as insufficient for the market to perceive."
South Korea Launched 24-Hour Forex Trading
South Korea launched 24-hour uninterrupted forex trading for the first time in its history. The expansion of trading hours represents an institutional change, while actual liquidity formation and price reliability during those hours will be determined by market participation.
FAQ
How much did foreign investors sell in Korean stocks during June?
Foreign investors sold 57.5 trillion won of Korean stocks in June, up from 48.9 trillion won in May, according to the Korea Financial Investment Association.
Why did MSCI reject Korea's developed market index inclusion?
MSCI questioned whether sufficient liquidity exists to handle large orders with narrow spreads during early morning hours, indicating that active trading during extended hours matters more than simply keeping markets open longer.
