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Foreigners likely to extend stock selling spree in May amid sluggish exports

May 4, 2020 - 15:56 By Jie Ye-eun

South Korea’s bourse regained some momentum in April as the spread of the new coronavirus showed signs of easing but the prolonged export slump will continue to deter foreign investors, brokerages said Monday.

According to the Korea Exchange, the country’s main bourse Kospi plummeted to an 11-year low of 1,439.43 on March 19, but recovered 35.3 percent to reach 1,947.56 on Wednesday.

After a selling spree by foreign and institutional investors on Monday, the index once again plunged to 1,894.29 around 3 p.m., then inched up to close at 1,895.37.

The latest plunge may be attributed partly to the longtime Wall Street investment strategy of selling in May and reentering the market in early November. But market observers say the main reason is the country’s extreme export slump -- the worst in more than a decade.

“Contrary to the general belief, foreign investors did not sell their local shares every May. Data shows that they dumped their shares only seven times over the last 20 years (2000-2019) in May,” said Kim Dae-jun, an analyst at Korea Investment & Securities.

It is the fundamental decline of the local market and the outflow of foreign capital that have dampened investor sentiment, he added.

Lee Eun-taek, an analyst at KB Securities, expected the Kospi index to fall about 10 percent to a monthly range of 1,780-2,030 this month, pointing out that reopened borders may increase the possibility of yet another wave of COVID-19.

“Due to the rapid surge in the prior month, further gains in the local stocks will likely be limited in May. We advise investors to keep a keen watch on possible index fluctuations for a while,” he said.

By Jie Ye-eun (