By Lee Min-hyung
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With foreign investors making a surprise return to the benchmark KOSPI, the Korean stock market is forecast to enjoy momentum for a rebound in tandem with weakening overseas financial uncertainties, analysts said.
The main bourse extended a losing streak to this year's new low of 2,540 points last month, hit hard by multiple risk factors, including global monetary tightening and the weakening local currency.
With Wall Street experiencing a bigger loss in May, investors' sentiment of fear showed little signs of recovery. But starting late last week, local stocks began picking up momentum for growth with a much-anticipated return of foreign investors.
According to data from the Korea Exchange, foreigner net buying of Korean stocks on the main bourse has been on the steep rise for the past week. They purchased local stocks worth 1.72 trillion won ($1.37 billion) for the past four trading days until May. 31.
May also marked the first month this year when foreign investor buying of local stocks exceeded their selling.
Market analysts have said that the KOSPI should be able to extend a winning streak on the reviving confidence from foreign investors, as chances remain slim for an additional fall as has been shown by multiple indices.
"A series of negative factors prevalent on the global financial market has already been reflected on the KOSPI, and this froze investors' sentiment to the extreme," Lee Kyoung-min, an analyst at Daishin Securities, said. The KOSPI will be able to achieve a rebound on rekindling relief sentiment prompted by foreigners' return, the analyst said.
The main bourse is unlikely to take a turn for the worse any time soon, as the Korean won is gaining ground against the U.S. dollar, he added.
The won-dollar exchange rate soared to a 12-year high of 1,290 won per dollar at one time in mid-May, when investors' fear of stock collapse reached its peak, not just from Korea but also major economies, including the U.S. The won closed at 1,237.2 won Tuesday.
Samsung Securities analyst Seo Jeong-hoon also expected more foreign capital to flow into the local stock market.
"Foreigners' investment portion here plunged to a historical low, but foreign capital is recently flowing in amid China's move to ease its lockdowns in Shanghai and investors' growing tolerance toward the Fed's monetary tightening," he said.
Foreign investors' top pick last month was automaker Kia, which closed with a gain of 2.5 percent on Tuesday. The second-most popular stock among investors of foreign nationality was LG Energy Solution, the stock price of which sharply rose on hopes for its earnings growth in the second half of this year.
Woori Financial Group came in third. The company is one of Korea's representative dividend stocks. Last year, Woori's dividend yield rate reached 5.98 percent, and the firm is widely expected to chalk up more revenue this year in line with the global rate hikes.
