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Korean financial market hit by stronger dollar
By Lee Min-hyung
Retail investors returned to the local stock market in February, extending a belated buying spree of blue-chip stocks, mirroring the activities of foreigners earlier this year.
Data showed Monday that retail investors net purchased 1.83 trillion won ($1.38 billion) worth of Korean shares between Feb. 1 and 24, surpassing the 1.04 trillion won foreign investors net bought over the same period.
POSCO Holdings topped the list of most favored stocks by retail investors, who net bought 474.2 billion won worth of the steelmaker's stocks. Kakao and Naver ― the nation's most advanced mobile and internet platform players ― followed on the list amid the global sensation of ChatGPT.
This is a surprise twist from a month earlier when foreign investors drove a robust rally of the benchmark KOSPI. In January, retail investors net sold local stocks worth 6.23 trillion won on then-spiraling fears of a recession here and abroad. But foreigners bought up local shares worth 6.37 trillion won during the same period, spurring a rare V-shaped recovery of the main bourse.
However, with foreigners displaying weakening sentiment from the beginning of February, the KOSPI has since failed to extend its winning streak and fluctuated at around 2,400 points. Foreign investors turned to selling for five trading days last week, a first for 2023. They sold 770 billion won worth of Korean shares during that period.
The main bourse closed at 2,402.64 points, Monday, down 0.87 percent from the previous trading day. The secondary Kosdaq also displayed a lukewarm performance with a slight gain of 0.18 percent.
Analysts expressed a gloomy outlook regarding the market amid reviving uncertainties in the global monetary environment.
"Foreign investors switched their position to selling for the first time in nine weeks, burdened by fears of stronger monetary tightening amid unstable macroeconomic circumstances here and abroad," said Lee Kyoung-min, an analyst from Daishin Securities.
The remark came amid widening financial volatility represented by a stronger dollar and the U.S. Federal Reserve's unwavering hawkish rhetoric.
"Foreigners' selling spree is unlikely to subside anytime soon, and we need to be wary of profit-taking sales by foreign investors for about a month to come," the analyst said. "The won-dollar exchange rate is also forecast to rise to as high as 1,370 won per dollar."
Starting in November, the U.S. dollar lost its ground against the Korean won at a rapid pace. But the local currency failed to defend its valuation against the dollar once again in February. The won-dollar exchange rate hovered at around 1,320 won as of Monday. This is a rise of around 90 won, or 7.3 percent, from the beginning of February. The Korean currency closed at 1,323 won per dollar, up 18.2 won from the previous trading day.
"The rekindling fear sentiment is forecast to enter a path of alleviation after the upcoming Federal Open Market Committee meeting in March, but investors are advised to be on alert over the possible aftershocks of the monetary issue on the financial markets here," the analyst said.
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