Foreigners net sell $46 trillion in domestic stocks; weak won persists

Foreign investors offloaded a record-breaking amount of South Korean stocks in May, selling over $46 trillion won (approximately $31 billion USD). This significant outflow marks the largest monthly net sale of domestic stocks by foreigners, surpassing the previous record set in March.

The substantial sell-off occurred even as South Korea's current account registered its largest-ever surplus in May, reaching $38.61 billion USD. This surplus was largely propelled by robust semiconductor exports, which helped companies earn substantial amounts of U.S. dollars.

However, the combination of foreign investors divesting from domestic equities and South Korean individuals increasing their investments in overseas stocks is contributing to a persistent trend of a weaker won and elevated exchange rates. The Bank of Korea noted that the increase in foreign stock sales was primarily driven by foreign investors taking profits following gains in the domestic stock market.

Conversely, foreign investors increased their net purchases of domestic bonds in May by $6.4 billion USD. This rise in bond investment is attributed to capital inflows related to South Korea's inclusion in the World Government Bond Index (WGBI). Despite the influx into bonds, the overall impact of foreign equity sales continues to influence the currency market.

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The scale of stock net sales by foreign investors has expanded due to foreign investors' profit-taking amid the rise in the domestic stock market.