Foreign stock ownership hits 6-year low on Ukraine risk, US rate hike jitters

Foreign ownership of South Korean stocks fell to a six-year low, bourse data showed Sunday, as overseas investors preferred safer assets in the wake of the Ukraine crisis and ahead of a widely expected US rate hike.

As of Friday, foreign investors held 666 trillion won (U$538 billion) worth of local stocks on the main KOSPI, accounting for 31.86 percent of the entire 2,091 trillion-won market capitalization, according to the data compiled by the Korea Exchange (KRX).

The foreign ownership shrank to the smallest portion since 31.77 percent on Feb. 11, 2016.

Foreigners' possession of KOSPI shares had reached nearly 40 percent in early 2020 before dwindling to 36.5 percent at the end of that year and 33.55 percent at the end of 2021, largely due to the pandemic and the stock rush among retail investors.

This year, the figure jumped to 34.2 percent on Jan. 25 ahead of the initial public offering (IPO) event by battery making behemoth LG Energy Solution, before falling back to the 31 percent range early this week.

Analysts attributed the foreign dumping of local stocks primarily to the uncertainties from Russia's invasion of Ukraine.

The invasion triggered economic sanctions from the United States and its allies, which turned investors risk-averse and appreciated the US dollar against the local currency.

From Feb. 18 to Friday, foreigners sold a net 5.75 trillion won on escalating tensions over Ukraine. The amount is sharply higher than the foreign net selling of 1.46 trillion for all of January and 2.3 trillion won from Feb. 1-17.

The local currency plunged to a 52-week low of 1,238.7 won intraday against the US dollar Tuesday, sharply weaker compared with the 52-week peak of 1,105 won on June 1, 2021, and closed at 1,232 won Friday.

Foreign selling was also fueled by market jitters about the US Federal Reserve's signal for aggressive policy tightening, analysts said.

The Fed chief has reiterated his stance to reign in the rising inflation pressure. The Fed is widely expected to raise the key interest rates in its monetary policy meeting next week and additionally throughout the year if the price pressure continues to grow fast.

The Fed is slated to announce its meeting results Wednesday (US time).

The KOSPI closed at 2,661.28 points Friday, down 1.92 percent from a week ago. (Yonhap)