Breaking record! Foreign investors suddenly sell off Korean stocks! What is happening in the world's "hottest" stock market?

Global investors sell Korean stocks at a record-breaking scale.

According to the latest data, on February 27 local time, foreign funds net sold 6.8 trillion KRW (approximately 32.3 billion RMB) of the Korea Composite Stock Price Index (KOSPI) components, setting a new single-day net selling record.

Prior to this, the Korean stock market had been soaring, with the KOSPI breaking through the 6,000-point mark. By the close on Friday, the year-to-date increase exceeded 48%, making it the top-performing market globally and earning it the title of the world’s hottest stock market. Analysts point out that the record-breaking sell-off by global investors is mainly a profit-taking move. After a short-term correction, there may still be room for further gains.

Foreign Capital Heavy Selling

On February 27, local time, according to data from the Korea Exchange, foreign funds net sold 6.8 trillion KRW of KOSPI components during regular trading hours.

This large-scale sell-off by foreign investors occurred after a period of strong gains in the Korean market. By Friday’s close, the KOSPI had gained over 48% this year, making it one of the best-performing markets globally. This week, the index even broke through the 6,000-point threshold, with Korea’s total market capitalization surpassing Germany and France consecutively.

Since hitting a low point in April last year, the KOSPI has surged more than 173%, leading major global markets by a wide margin.

Analysts believe that this large-scale foreign sell-off does not signal a trend reversal but rather reflects technical adjustment pressures. Kim Namho, fund manager at Seoul-based Timefolio Investment Management, explained that the mechanical rebalancing of the benchmark index at month-end, combined with profit-taking after a rapid rally, amplified the selling volume on that day.

Notably, during the period of net foreign selling, domestic institutions and retail investors chose to buy on dips, partially absorbing the foreign selling pressure. This indicates a relatively optimistic outlook among domestic investors about the market’s future. Kim Namho stated that the mainstream view still considers Korean stocks undervalued, and the current correction does not change the long-term upward trend. After this consolidation, there remains ample room for further gains.

The recent bull market in Korea’s stock market is driven by explosive growth in global memory chip demand. As the primary listing venues for Samsung Electronics and SK Hynix, Korea’s stock market has directly benefited from this memory cycle boom.

Analysts note that although Korea’s market has long been overlooked by foreign funds due to valuation concerns, it has now become an increasingly prominent star in the global market. Korea’s total market capitalization has surpassed that of major European economies like Germany and France, encouraging more international investors to rush in. The enthusiasm for Korean assets is high, with the iShares MSCI Korea ETF listed in the US seeing a record daily trading volume of $6.4 billion on Thursday.

Additionally, corporate governance reforms in Korea have also supported the stock rally. On February 25 local time, the Korean National Assembly passed a long-debated amendment requiring listed companies to cancel treasury shares. Treasury shares are shares repurchased by the company and held in treasury; in many markets, they are seen as temporary tools and are usually canceled to boost shareholder returns. In Korea, however, they are often held indefinitely.

The new law stipulates that newly repurchased treasury shares must be canceled within one year, with a six-month grace period for existing treasury shares, meaning they must be canceled within 18 months.

Positive Signals for the Korean Economy

Meanwhile, positive signals are emerging for Korea’s economy—exports in February are expected to record the ninth consecutive month of positive growth.

According to recent media surveys, the median forecast for Korea’s February exports is a 24.0% year-on-year increase. Although this is lower than the 33.8% growth in January—the highest monthly growth since August 2021—it remains the second-fastest annual growth rate since the current growth cycle began in June 2025. Data from the first 20 days of the month preliminarily confirms this trend, with exports up 23.5% year-on-year, and semiconductor exports soaring by 134.1%.

On February 26, Korea’s central bank raised its 2023 economic growth forecast from 1.8% to 2.0%, citing chip exports as a key driver, and signaled that monetary policy would remain stable over the next six months while keeping interest rates unchanged.

Economists note that chip prices have risen more than expected, and Korea’s semiconductor inventories remain low, supporting sustained strong exports. However, due to tariffs, exports of automobiles and machinery are weaker, posing some drag. Korea’s official trade data is scheduled to be released on March 1 (Sunday).

Economists also observe that the surge in chip prices exceeds previous expectations, and Korea’s semiconductor inventories are still low, both supporting the continued strength of semiconductor exports.

Stephen Lee, analyst at Meritz Securities in Seoul, predicts that in the first half of this year, Korea’s semiconductor exports could grow by more than 100%.

Jung In Yun, CEO of Fibonacci Asset Management Global, commented, “As the KOSPI reaches 6,000 points, the upside potential may become more gradual. Its sustainability will depend on profit realization and whether the gains can extend from a few semiconductor heavyweight stocks to a broader range of sectors. Without such support, some sectors may consolidate or rotate, which is not unusual.”