On Oct. 12, the KOSPI closed down 3.65% at 6,384.24. Foreign investors net sold (sold more than they bought) KRW 2.0186 trillion (about $1.51 billion) of KOSPI stocks that day. On Oct. 8, Samsung Electronics had reported third-quarter operating profit of KRW 107.4 trillion (about $80.4 billion), up 782.5% from a year earlier.
At first glance, it is easy to think foreigners have soured on the future of Korean chips. The story would be that they sell because they expect profits to fall.
But the real point lies elsewhere. Samsung's results beat market expectations, and Korea's chip exports for Oct. 1-10 rose 170.1% from a year earlier. Lee Jae-won, an analyst at Yuanta Securities, said, "The biggest worry in the Korean stock market right now is not chip earnings but foreign flows." Yet there is no single agreed explanation of why foreigners are selling.
- How much did foreigners sell while earnings were strong?
Foreign investors net sold KRW 21.5 trillion (about $16.1 billion) on the main board (the market where KOSPI stocks trade) in September alone, and nearly KRW 8 trillion (about $6 billion) more in October through the 12th.
The selling was concentrated in big chip stocks. From Sept. 1 to Oct. 2, foreigners net sold KRW 12.009 trillion (about $9 billion) of SK hynix and KRW 5.186 trillion (about $3.9 billion) of Samsung Electronics. On Oct. 2, foreign ownership of SK hynix stood at 49.76%, the lowest since May 2023.
Put simply, foreign selling did not stop either before or after the earnings release. Samsung shares fell 2.42% on results day and 4.39% on Oct. 12.
- Why can't analysts agree on one explanation?
Explanations for the foreign selling and the KOSPI's fall come in four strands: prices rose so fast that overseas funds sold to get back to their target weights; the drawn-out U.S.-Iran war and rising interest rates in major economies; worries about the U.S. AI industry; and the winding down of the Samsung Electronics and SK hynix share buybacks that had propped up the index. Samsung finished buying the shares it had planned to buy back by Oct. 1.
Kang Jin-hyuk, a senior analyst at Shinhan Investment, first pointed to supply-and-demand effects from the Oct. 8 options expiry (the day derivative contracts end) and ETF (a fund that trades a basket of stocks) rebalancing when explaining the Oct. 12 drop, then added, "In particular, the market reacted sensitively to AI-related worries despite strong exports." Back in May, too, the investment industry was split between those who saw short-term profit-taking and those who said to watch structural factors such as monetary policy and the currency.
It is like four doctors each giving a different reason for the same fever. The difference is that exchange data show how much foreigners sold, but not why.
- Does the "rebalancing" explanation still hold?
In May, most experts read the foreign selling as rebalancing. In June, Chetan Seth, Asia-Pacific equity strategist at Nomura, said, "What we are seeing is effectively close to forced selling," and Nick Wilcox of Man Group said, "Much of the recent selling is a mechanical cut in weightings by investors who have hit their active management limits."
Think of a household budget. Say a KRW 100 million fund sets Korean stocks at 10% (KRW 10 million). If only Korean stocks rise and that share hits 13%, the fund sells the extra, about KRW 3 million (illustrative math).
But conditions have changed. The KOSPI is now nearly 30% below its June 22 peak of 9,114.55. Even so, selling of more than KRW 21 trillion in September and nearly KRW 8 trillion in October has continued. "Trimming what rose" alone can hardly explain this selling.
- If the currency is to blame, why doesn't Oct. 12 fit?
Another factor raised back in May is the exchange rate. When the won weakens, foreigners get fewer dollars when they sell Korean shares and convert the proceeds. So the idea is that they rush to sell when the won is weak.
Oct. 12 was the opposite. The won-dollar rate closed at 1,335.0, down 7 won from the previous session, meaning the won strengthened. KRW 10 million converts to about $7,452 at the previous session's rate (1,342 won) and about $7,491 at that day's rate (illustrative math). It was not a bad day for the currency, yet foreign net selling topped KRW 2 trillion.
Put simply, the currency alone can hardly explain that day's selling.
- Who is buying what foreigners sell?
From Oct. 1 to Oct. 12, individual investors net bought KRW 4.1 trillion (about $3.1 billion) and other corporations KRW 5.5 trillion (about $4.1 billion) on the main board.
Meanwhile, shares got cheaper relative to earnings. The KOSPI's P/E ratio (share price divided by earnings per share; the lower it is, the cheaper shares are relative to profits) was 11.05 on Oct. 8, the lowest since January 2023.
In used-goods terms, the item is in great condition, but a big seller keeps listing the same thing and pushes the price down. The difference is that in the stock market, the big seller never says in advance when they will stop.
- BITPRESS Insight
Right now, no single explanation covers why foreigners are selling. Rebalancing, rates and war, AI worries and the end of buybacks are all on the table, but none of them neatly explains why foreigners sold more than KRW 2 trillion on a day when earnings had beaten expectations and the won had strengthened.
What this changes is the judgment of individuals who hold big chip stocks. Strong earnings were expected to lift share prices, but this time they did not. A KRW 10 million stake in Samsung Electronics lost about KRW 440,000 on Oct. 12 alone (based on the 4.39% drop, illustrative math).
Watch the outcome rather than guessing the reason. Whether shares start rising on days with good earnings news is the simplest yardstick for judging whether foreign selling is losing steam.
Sources
https://www.newspim.com/news/view/20261012001236
https://biz.sbs.co.kr/amp/article/20000339434
https://biz.sbs.co.kr/amp/article/20000338049
https://www.fnnews.com/news/202610081128383936
https://kbmaeil.com/article/20261004500013
https://www.newsis.com/view/NISX20260609_0003662038
https://www.mt.co.kr/article/2026060211015791899
https://www.fnnews.com/news/202605171819344750
Glossary
Supply and demand — The flow of money wanting to buy shares and shares being offered for sale, meaning who is buying and selling how much.
Rebalancing — When a fund's set weights by country or stock drift because of price moves, it buys or sells to bring them back to the target.
Active management limit — The maximum weight a fund manager is allowed to hold in one country or one stock.
Other corporations — An investor category for ordinary companies that are not counted as individuals, foreigners or institutions.
Preliminary results — Earnings a company announces before they are finalized by an audit.
KOSPI — Korea's main stock index, made up of the companies listed on the Korea Exchange's main board, much like the S&P 500 in the U.S.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
