Seoul, Aug 3 Foreign investors recorded their highest net purchases on South Korea's benchmark index in 17 months last month, data showed on Sunday, though experts warned of a potential market correction amid the growing impact of U.S. President Donald Trump's sweeping tariff plan and a strengthening U.S. dollar.
Offshore investors net purchased 6.28 trillion won (US$4.52 billion) worth of stocks on the benchmark Korea Composite Stock Price Index (KOSPI) in July, marking the largest monthly net buying since February 2023, when the figure reached 7.858 trillion won, according to the Korea Exchange (KRX).
The July amount was also 2.3 times greater than June's net buying of 2.69 trillion won, reports Yonhap news agency.
Offshore investors had turned to net selling in August 2024 and continued the trend for nine consecutive months through April.
In May, however, they shifted to a net buying mode with around 1 trillion won in purchases and have maintained a net buying position for three months in a row through July.
The surge in foreign buying is mainly attributed to optimism about the new Lee Jae Myung government's stock market stimulus measures and hopes for a tariff deal between South Korea and the United States.
Investors also welcomed the news that top-cap Samsung Electronics signed a large-scale supply deal with Tesla.
"From the perspective of foreign investors, renewed hopes for stronger performances of Samsung Electronics influence how they view the overall Korean stock market," said Lee Kyung-min, a researcher at Daishin Securities.
Tech giant Samsung Electronics was the top stock bought by foreign investors in July, with net purchases totaling 3.49 trillion won, accounting for 56 percent of the total foreign net buying on the KOSPI.
Major shipbuilder Hanwha Ocean was the second most purchased stock by foreigners, with net buying amounting to 858 billion won, amid hopes for stronger cooperation with the U.S.
Supported by the strong foreign buying, the KOSPI rose 5.7 percent last month.
Experts, however, expect the domestic stock market to undergo a correction in August as the impact of the U.S.' tariffs becomes more pronounced and the U.S. dollar is projected to strengthen further.
"While earnings momentum is lacking in the domestic market, a short-term market correction seems inevitable. Increased volatility is expected this month," said Kim Jun-woo, a researcher at Kyobo Securities, projecting the KOSPI to fluctuate between 2,900 points on the downside and 3,300 points on the upside.
The local currency weakened recently to near the 1,400-won level against the dollar, and experts forecast the greenback to remain strong going forward.
On Friday, the KOSPI dropped 3.88 percent to close at 3,119.41, marking the largest daily loss since April 7, as investor sentiment was hurt by the government's tax revision proposal to raise taxes on corporations and stock investors.
The local currency was quoted at 1,401.4 won against the greenback at 3:30 p.m. Friday, down 14.4 won from the previous session, marking the lowest won-dollar rate since May 14.
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