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| The logo of SK hynix is seen in this file photo. Korea's second-largest chip stock achieved a surprising gain of almost 6 percent on the benchmark KOSPI, Thursday. Yonhap |
BOK faces less burden on foreign capital outflow
By Lee Min-hyung
Korea's major large-cap tech stocks extended a sharp rally, Thursday, buoyed by foreign investors' mass-buying spree, after the Bank of Korea (BOK) announced its widely anticipated decision to freeze its key rate.
The latest monetary decision kept the interest rate gap between Korea and the United States unchanged at a historic high of 1.75 percentage points, but this has not posed any serious threats to the Korean stock market.
When the gap widens, foreign investors have a tendency to pull their capital out of Korea in search of higher returns. The BOK faced a dilemma over whether to increase the key rate this time on fears of a possible foreign capital outflow here.
But the lingering woes appear to show signs of abating, after the stock prices of leading semiconductor and tech firms ― such as Samsung Electronics and SK hynix ― went on a winning streak. The benchmark KOSPI also displayed little volatility despite the central bank's rate freeze. The main bourse opened with a gain of 0.12 percent and closed at a slight loss of 0.5 percent at 2,554.69 points.
Foreign investors drove the tech rally. Shares of SK hynix jumped around 6 percent on Thursday on foreigners' buying spree. Shares of Samsung Electronics ― the nation's most valuable firm by market capitalization ― also continued its stock rally with a gain of 0.44 percent during the same period. Foreign investors purchased Samsung shares worth 9.46 trillion won between Jan. 2 and May 19, which accounts for more than 85 percent of their total net-buying in the KOSPI.
Regardless of the BOK's upcoming rate decision, analysts raised hopes for more foreign capital inflow.
"Foreign investors' expanded buying of local shares will also help defend the valuation of the local Korean currency," Hi Investment & Securities analyst Park Sang-hyun said. But the future movement of foreigners will be determined by whether uncertainties ― regarding the Chinese economy and chip market sentiment ― are cleared away.
Han Ji-young, an analyst at Kiwoom Securities, said foreign capital movements will be swayed by the course of the won-dollar exchange rate.
"The BOK's monetary decision will have a limited impact on the stock market here, but the point should be on the movement of the exchange rate, which is a key driver to change foreigners' position," the analyst said.
The Korean won slightly lost its ground against the U.S. dollar on Thursday. The won-dollar exchange rate closed with a gain of 8.6 won at 1,326 won per dollar. The rate has been on a rollercoaster ride for the past year. The figure topped over 1,400 won per dollar in October last year, but fell steeply to around 1,250 won as of the end of January 2023. Starting from the second quarter, however, the exchange rate has not displayed signs of volatility.
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