Kospi Drops 1.5% as Foreign Investors Exit Before Samsung Results

Foreign investors sold 2.2 trillion won on July 3, and the Kospi fell 1.5% to 7,947 on July 6 as traders trimmed positions ahead of Samsung Electronics’ preliminary results.

The selling was the 11th consecutive day of net foreign outflows and pushed overseas sales to more than 157 trillion won (about $100 billion) since the start of the year. The index had risen from 2,268 in April last year to a peak of 9,387 before the recent retreat.

Foreign ownership of KOSPI-listed stocks is around 39.5%. In a note, a senior KB Securities analyst wrote: “Historically, the foreign ownership ratio in the KOSPI has ranged from 29% to 45%, excluding the 2009 Lehman crisis. If the foreign ownership ratio, currently at 39.5%, drops to 35%, an additional sell-off of approximately 260 trillion Korean won is possible.”

Retail participation in South Korean equities has increased. Estimates put the number of so-called “ant investors” at more than 15 million, up from about 9 million in 2019. A Citi report shows retail holdings in the Kospi rose to 79 trillion won this year and margin borrowing climbed to a record 29 trillion won.

The recent gains in the Kospi have been concentrated in a few large-cap names, notably Samsung Electronics and SK Hynix, which have benefited from the memory-chip cycle. Samsung is scheduled to publish preliminary second-quarter results on July 7 and final Q2 numbers on July 23. SK Hynix is set to report on July 29.

Micron Technology recently reported a quarterly revenue increase of more than 300% and guided to higher revenue next quarter. Market participants are watching whether Samsung and SK Hynix post comparable results.

Technical indicators show the Kospi has pulled back from its year-to-date high and moved below the lower boundary of an ascending channel. The index remains above its 50-day moving average. Market technicians noted that continued selling could push the index toward the 100-day exponential moving average near 6,968.

Traders and strategists say upcoming semiconductor earnings are likely to influence trading in the near term, as results from major memory firms will be compared with recent industry reports.