Foreign inflow fuels Kospi rally

Foreign investors have poured nearly 4 trillion won ($3 billion) into the nation’s benchmark Kospi so far this month, helping to drive a strong bullish run in the local stock market.

Offshore investors net purchased shares worth 3.78 trillion won on the Kospi through Tuesday in June, continuing the 1.16 trillion won buying spree that began in May, according to data from the Korea Exchange, the nation’s bourse operator.

While they net bought shares worth 125 billion won on June 2, the amount surged on June 4, a day after the country's presidential election, to 1.05 trillion won, followed by a 980 billion won net purchase on June 5.

On Monday and Tuesday, foreigners net bought shares amounting to 977 billion won and 634 billion won on the Kospi, respectively.

The rally pushed the index to close daytime trading at 2871.85 on Tuesday, up 16.08 points or 0.56 percent, from the previous session. During intraday trading, the Kospi surged to as high as 2,885.67, nearing the 52-week high set at 2,896.43 on July 11 last year.

The buying momentum has been partly fueled by growing expectations of political stability and reform following President Lee Jae-myung’s election victory last week.

“With the inauguration of the Lee Jae-myung administration, expectations for revisions to the Commercial Act and efforts to address the ‘Korea Discount’ have stimulated foreign investor inflows,” said Lee Kyoung-min, an analyst at Daishin Securities.

“Protection of minority shareholder rights and improvements in corporate governance — longstanding demands from global investors — remain key themes. Foreign investment flows into the Korean stock market have clearly improved against this backdrop of policy-driven optimism and attractive valuations.”

Backed by the rally, the Kospi has emerged as the best-performing major stock market worldwide over the past week, outpacing key global indices such as Hong Kong’s Hang Seng, Denmark’s OMX Copenhagen 25 and Japan’s Nikkei 225, according to a list compiled by financial platform Investing.com. While not exhaustive, the list features selected stock indices of significant size and market value.

Year-to-date, the Kospi has risen 19.36 percent, ranking as the eighth-best performer globally. It trails Poland’s WIG 20 index, the top performer so far this year, which has surged 24.67 percent, placing the Kospi roughly five percentage points behind.

Among the indices that function as comprehensive market indices that reflect the overall performance of their respective national stock markets, the Kospi ranked behind only those of Russia, Germany, Austria and Hong Kong. The others, such as the WIG 20, were composed of a limited number of selected large-cap companies.