Profit-taking! Foreign capital sets record selling in South Korean stock market, offloading 6.8 trillion won in a single day

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Global investors sold Korean stocks on Friday in record amounts, marking a concentrated profit-taking after Korean stocks had surged nearly 50% this year.

According to data from the Korea Exchange, foreign funds made net sales of 6.8 trillion won (about $4.7 billion) of Korea Composite Stock Price Index (Kospi) constituent stocks during regular trading hours, setting a new single-day net sell record. Dragged by this, the Kospi Index fell 1%, ending its previous six-day rally. Meanwhile, local institutions and retail investors showed net buying momentum.

This sell-off in Korean stocks occurred after an unusually strong rally. From the low in April last year, the Kospi has soared about 170%, significantly outperforming major global markets. This week, the index even broke through the 6,000 point mark, with Korea's stock market capitalization at times surpassing the combined value of Germany and France, causing abnormal trading and price fluctuations in overseas-listed ETFs.

Kim Namho, a fund manager at Seoul's Timefolio Investment Management, stated that the pullback was mainly triggered by month-end index rebalancing and profit-taking after sharp gains. He also pointed out, "The market generally believes that Korean stocks are still undervalued, and there is still plenty of room for further gains after this adjustment."

Memory Boom Drives Korean Stocks to Lead Globally

The current bull market in Korean stocks is driven by explosive global demand for memory chips. As the main listing venue for Samsung Electronics and SK Hynix, Korea directly benefits from this memory boom cycle. Even though "panic trading" of AI-related assets has pressured other regional stock markets, Korean stocks have largely remained strong.

The Kospi broke through the 6,000 point mark this week, just about a month after President Lee Jae-myung set 5,000 points as a political goal, far exceeding market expectations.

Korea’s stock market capitalization surpassing Europe's heavyweight economies Germany and France has accelerated the inflow of international investors. The enthusiasm for overseas markets to allocate Korean assets is high, with some overseas-listed Korean-related ETFs seeing abnormal surges in trading volumes and price deviations.

Month-End Rebalancing and Profit-Taking Trigger Record Single-Day Sell-off

Analysts believe this large-scale foreign reduction is not a signal of a trend reversal, but more reflects technical adjustment pressure. Kim Namho pointed out that mechanical month-end index rebalancing operations and profit-taking after sharp gains coincided in the same time window, together amplifying the day's sell-off scale.

It is worth noting that during the period of net foreign selling, local institutions and retail investors chose to buy on dips, to some extent absorbing the selling pressure from foreigners, indicating a relatively optimistic domestic market outlook. Kim Namho stated, The mainstream view still considers Korean stocks undervalued, and the current adjustment does not change the long-term upward logic.

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