Shinhan Securities analyst Lee Sang-yeon stated in a report that foreign investors historically support KOSPI when the index declines excessively below fair valuations. The analyst noted KOSPI's forward price-to-earnings ratio reached 5.7x, approaching undervalued territory. Lee explained foreign ownership in KOSPI stands at 40.5%, with core holdings Samsung Electronics at 46.7% and SK Hynix at 52.5% - all below their 10-year averages, indicating structural room for additional inflows.
Foreign Ownership Rates Fall Below 10-Year Averages
Lee diagnosed that KOSPI's overall foreign ownership ratio remains in the early 40% range at 40.5%. The analyst stated Samsung Electronics' foreign ownership stands at 46.7% and SK Hynix at 52.5%, both already below their 10-year average levels. Lee characterized these core market-representative stocks as having foreign ownership percentages that have declined from historical norms.
KOSPI Forward P/E Ratio Reaches 5.7x
The analyst analyzed that foreign investor inflows historically occurred during phases when index declines became excessive. KOSPI's forward price-to-earnings ratio based on the previous session descended to 5.7x, approaching the undervalued zone. Lee stated that while foreign investor flows are difficult to predict, one repeatedly confirmed pattern is that foreign inflows return when index declines become excessive.
The analyst explained that rather than predicting index direction through foreign investor flows, a realistic approach involves judging whether current levels can be viewed as short-term bottoms.
Foreign Investors Reduce Cumulative Selling from 22 Trillion Won
According to Lee, foreign investors continued net selling in both spot and futures markets since May, with cumulative net selling reaching 22 trillion won at one point. However, they subsequently reduced futures net selling to the 13 trillion won range. This month, foreign investors turned to net buying in the spot market after 14 days.
Lee emphasized that even if the precise timing of foreign investor re-entry cannot be predicted, when foreign investors sustain flows that support the downside, this can be interpreted as entering a reliable oversold zone. The analyst also noted that compared to past phases when foreign ownership in Samsung Electronics and SK Hynix rose to 55-57%, the current lowered ownership ratio itself can be interpreted as space for rebound buying.
FAQ
What is the current foreign ownership percentage in KOSPI stocks?
Foreign ownership in KOSPI stands at 40.5% overall, with Samsung Electronics at 46.7% and SK Hynix at 52.5% - all below their 10-year average levels according to Shinhan Securities analyst Lee Sang-yeon.
How much did foreign investors sell in Korean stocks since May?
Foreign investors cumulatively net sold 22 trillion won in both spot and futures markets since May, but subsequently reduced futures net selling to the 13 trillion won range and turned net buyers in the spot market after 14 days this month.
