Foreign investors net sold 57.1 trillion KRW worth of stocks across Korean exchanges in June, averaging 2.7 trillion KRW daily over 21 trading days, according to Yonhap Infomax trading data. Combined with May's 48.5 trillion KRW in net selling, the two-month selling spree maintained a consistent daily average of 2.7 trillion KRW, creating unprecedented custody dollar demand that pushed the USD-KRW exchange rate upward. Despite this massive selling pressure, the exchange rate stabilized around 1,500 KRW levels, with market participants noting the rate's failure to breach 1,560 KRW represented effective resistance given the extreme supply-demand imbalance.
Foreign Investors Net Sold 2.7 Trillion KRW Daily Across Korean Stock Markets in May-June
In June, foreign investors net sold 48.4 trillion KRW in stocks on the KOSPI market over 21 trading days, equivalent to 2.3 trillion KRW per day. When including KOSDAQ and NEXT trade transactions, total net selling reached 57.1 trillion KRW, translating to 2.7 trillion KRW in daily outflows.
May exhibited similar patterns. Foreign investors net sold 44.4 trillion KRW on KOSPI during 18 trading days, averaging 2.4 trillion KRW daily. Adding KOSDAQ and NEXT trade brought monthly net selling to 48.5 trillion KRW, approaching 2.7 trillion KRW in daily average.
The unprecedented two-month period of sustained 2.7 trillion KRW daily selling triggered strong custody dollar buying inflows and drove the USD-KRW exchange rate higher. Daily net selling of 1 trillion KRW became normalized, with market participants viewing any reduction to hundreds of billions of KRW as a downward catalyst for the exchange rate.
Record Trade Surplus and Authority Intervention Prevented USD-KRW Rate From Reaching 1,600 KRW
Market observers noted the supply-demand imbalance from extreme foreign stock selling could have driven the USD-KRW rate to 1,600 KRW, making the stabilization around mid-1,500 KRW levels a defensive achievement.
May's current account surplus reached a record 38.61 billion USD. June exports hit an all-time high of 102.25 billion USD, while May exports of 87.75 billion USD previously held the record. Substantial dollar selling by exporters at peak levels acted as a brake on exchange rate appreciation.
Foreign exchange authorities conducted smoothing operations, viewing mid-1,500 KRW rates as divergent from fundamentals. Market participants refrained from speculative upward bets after confirming authorities' strong commitment.
The National Pension Service initiated currency hedging through forward exchange selling from early June, further capping upward pressure. One foreign exchange market expert stated: "Had there been purely foreign stock selling alone, the USD-KRW rate reaching 1,600 KRW would not have been surprising. The upper band was defended through authority intervention, exporter negotiation volumes at peaks, and National Pension currency hedging."
Bank of Korea Governor Forecasts Won Strengthening as Foreign Selling Subsides
Foreign investors switched to net buying from July 8 after continuous selling through early July, signaling a potential directional shift.
Bank of Korea Governor Shin Hyun-song stated during parliamentary reporting: "The current account surplus is accumulating significantly. We see considerable room for the won to turn toward strength going forward." He added: "We expect foreign selling pressure to subside somewhat in the second half of this year."
Market experts cited additional downward factors including large-scale dollar inflows from SK Hynix's ADR listing in the US and currency exchange promotion through government mega-projects.
One market expert commented: "While KOSPI's recent decline is significant, from an exchange rate perspective it reduces rebalancing selling pressure, which could actually be positive. Long-term, mega-projects are expected to transform exporter currency exchange behavior."
FAQ
Q: How much did foreign investors sell in Korean stocks during May and June?
A: Foreign investors net sold 48.5 trillion KRW across all Korean exchanges in May and 57.1 trillion KRW in June, averaging 2.7 trillion KRW daily in both months according to Yonhap Infomax data.
Q: Why did the USD-KRW exchange rate not reach 1,600 KRW despite massive foreign selling?
A: The exchange rate stabilized around 1,500 KRW due to record trade surpluses generating exporter dollar selling, foreign exchange authority smoothing operations, and National Pension Service currency hedging initiated in early June.
Q: What did the Bank of Korea Governor say about future won exchange rate direction?
A: Bank of Korea Governor Shin Hyun-song stated the current account surplus is accumulating significantly and there is considerable room for the won to strengthen, expecting foreign selling pressure to subside in the second half of the year.
