KOSPI Holds Up Despite Foreigners Selling 192 Trillion Won; Foreign Flows Seen as Key Variable in Second Half

[Financial News] Foreign investors have net sold more than 190 trillion won in the KOSPI (Korea Composite Stock Price Index) market alone so far this year. Even so, institutions and individual investors stepped in with large-scale buying, allowing KOSPI to keep climbing steadily and break above the 9,000 level. However, as retail investors have recently begun taking profits in earnest, the recovery of foreign inflows and improvement in overseas investment sentiment are emerging as the key variables for the domestic stock market in the second half.
According to KOSCOM CHECK on the 10th, foreign investors had net sold 191.9 trillion won in the KOSPI market from the start of the year through the 9th. The figure combines trading on the Korea Exchange and NextTrade, an alternative trading system. That is more than 21 times last year’s annual net selling total of 9 trillion won.
Market participants say KOSPI was able to break above 9,000 for the first time ever last month because individuals and institutions absorbed the massive foreign selling.
However, the burden from the sharp short-term rally has also led more retail investors to lock in gains. On the 9th, institutions posted net purchases of 1.2879 trillion won on the main bourse, while foreigners bought a net 146.1 billion won. Individuals, by contrast, net sold 1.3307 trillion won.
As profit-taking increased, market volatility also widened. KOSPI, which first moved above 9,000 on the 18th of last month, fell to 7,291.91 on the 9th. Compared with the closing level of 8,303.41 on the 1st, that marked a drop of 1,011.5 points in just seven trading days. Over the same period, foreigners’ share of KOSPI holdings also fell from 40.8% to 39.7%.
Analysts say concerns over National Pension Service (NPS) rebalancing, once seen as the biggest supply-and-demand variable for the second half, have eased significantly. As the KOSPI correction brought the pension fund’s domestic equity allocation back within its target range, the expected pressure from large-scale rebalancing sales has diminished.
Yoon Yeo-sam, a researcher at Meritz Securities, said, "As KOSPI fell, the National Pension Service’s domestic stock allocation is estimated to have moved back within the allowable range for strategic asset allocation (SAA)." He added, "The burden from rebalancing sales that the market had initially feared has been largely eased."
By contrast, overseas investment institutions are taking a somewhat more cautious view. BlackRock, the world’s largest asset manager, downgraded its view on EM stock investment over the next 6 to 12 months from "Overweight" to "Neutral" in its "Global Investment Outlook for the Second Half of 2026," released on the 30th of last month local time.
BlackRock said markets such as Korea and Taiwan, where large-cap stocks tied to Artificial Intelligence (AI) account for a high share, could see concentration in a few names intensify. It explained that because a small number of stocks, including Samsung Electronics, SK hynix and Taiwan’s TSMC, are driving the market, volatility could rise if AI investment sentiment shifts.
Still, securities firms say short-term supply and demand should be viewed separately from corporate earnings. Weak foreign flows and downgrades in overseas investment views are short-term headwinds, but if the NPS rebalancing burden continues to ease and earnings improve, especially in semiconductors, the upward trend in the domestic stock market could continue.
Regarding foreign flows, Yoon said, "Foreign investors have tended to increase their holdings when operating profit growth is negative, then sell in a trend before growth turns positive and reaches a peak." He added, "That is because they still view semiconductors as a conventional cyclical industry, and the current phase follows the same pattern."
He added, "For foreign inflows to reverse, there needs to be a consensus that the memory cycle is different from a typical cycle." Yang Il-woo, a researcher at Samsung Securities, said, "I expect Korean stocks to remain strong in the second half." He added, "Earnings forecasts for the semiconductor sector are likely to be revised up further, and as nominal GDP grows going forward, earnings estimates for financial and consumer sectors are also likely to be upgraded."
khj91@fnnews.com Kim Hyun-jung Reporter