An electronic board set up in a dealing room of Hana Bank in Seoul shows the closing price of the benchmark KOSPI and the won-dollar exchange rate, Tuesday. Yonhap

By Lee Min-hyung

Foreign investors have made a surprise return to the benchmark KOSPI in January on the weakening dollar and growing hopes for an end to the cycle of global monetary tightening, data showed Wednesday. According to the Korea Exchange, foreign investors purchased Korean shares worth 1.82 trillion won ($1.46 billion) between Jan. 2 and Jan. 10.

They maintained their position of selling local stocks up until last month, but shifted their stance by expanding the net-buying of major large-cap stocks in semiconductor, finance and IoT sectors.

The steep decline of the won-dollar exchange rate is cited as the biggest reason behind foreign investors' return. The rising valuation of the local currency generally motivates more foreign capital inflow. The exchange rate hit a high of more than 1,400 won per dollar in early October, but has since shown signs of gradual stabilization, dropping to around 1,250 won as of Wednesday.

As expected, Samsung Electronics topped the list, with foreign investors purchasing shares worth 722.9 billion won this month. SK hynix came in second with 187.7 billion won.

"Foreigners' shareholding ratio in the main bourse recovered to more than 30 percent after bottoming out," Choi Yoo-joon, an analyst at Shinhan Securities, said. "The once-strong rally of the dollar also came as a burden to foreigners' return to KOSPI, but fears are being alleviated."

But of particular note was that they also expanded the buying of major financial stocks here.

KB Financial Group was the third-most favored stock of foreign investors this month. Hana Financial Group and Shinhan Financial Group followed on the list. Starting from the beginning of 2023, the nation's representative financial stocks achieved a robust rally, as demand for loans is forecast to keep rising throughout this year due to the government's deregulatory policy direction on the real estate market.

Coupled with this demand, the high interest rate comes as a boon for financial firms' earnings growth.

Upcoming big announcements ― including the U.S. consumer price index for December and the results of the Bank of Korea's rate-setting meeting ― are expected to determine foreign investors' position on the KOSPI for the next few weeks.

Foreign investors also dumped POSCO Chemical shares the most during the same period. They sold 107 billion won worth of the firm's shares. Korea Aerospace Industries came in second in terms of the stocks least-favored by foreign investors for the first 10 days in January. Hyundai Mobis followed on the list, with foreign investors selling 43.5 billion won worth of its shares.