Stocks continue to drop in value as investors fear economic slowdown
South Korea’s shares will continue to lose their momentum, market analysts say, as concerns over an interest-rate hike and an economic slowdown could prompt foreign investors to unload their holdings.
According to Korea Exchange, foreign investors sold a net 3.99 billion USD in May in the local stock market, second only to sales in Japan, where a net of 5.17 billion USD was unloaded.
Not just in South Korea and Japan, but in other Asian countries, foreign investors continued to cut their positions, selling off a total of 12.53 billion USD. Experts blamed the massive unloading of Asian stock by foreign investors on the sharp decline in Asian share prices over the past months. The trend is expected to be in place for months to come, the experts warned. "For the time being, foreign investors will likely remain on the fence. They will do so at least until June 28, when the Federal Open Market Committee of the U.S. will make a decision on an interest-rate hike." an expert said. Foreign fund managers are also increasing their cash holdings and moving their investment away from emerging markets to the United States. According to The Financial Times, which cited a monthly report released by Merrill Lynch, cash holdings by foreign fund managers in South Korea rose to 4.5 percent at the end of May, from 4.1 percent earlier that month, reflecting their increased sale of market shares. The report also conducted a survey of 166 fund managers, of which 29 percent said they would increase their cash holdings down the road, the foreign newspaper said. Among them, 12 percent said that they would cut their shareholdings in emerging markets, including South Korea. "Up until April, foreign investors preferred risky assets, but things have changed, as concerns are mounting over a possible rate hike and a sluggish economy," an expert said. The expert noted that these concerns could be coupled with pessimistic predictions that there will be an end to growth in Brazil, Russia, India, and China. On Wednesday, foreign investors sold a net 482 billion won in shares, but the benchmark Korea Composite Stock Price Index (KOSPI) gained 1.48 percent from a day earlier to close at 1221.73 points.
