Foreign investors dump record Korean stocks as locals ramp up leveraged chip bets

Foreign investors sold a net $310.5 billion (about 46 trillion won) of South Korean equities in May, the largest monthly outflow on record. The sell‑off was driven by profit‑taking as the market rose, while foreigners bought about $64 billion of Korean bonds, according to the Bank of Korea. The capital outflow pushed the won to an average of 1,528 per dollar in May, the weakest level since the 1998 IMF crisis.

At the same time, domestic investors sharply increased margin loans to buy Samsung Electronics and SK Hynix shares, raising total credit balances for the two stocks to roughly 10.6 trillion won. Foreign investors, however, expanded short‑selling activity, with their borrowing of shares in the two chips reaching about 9.3 billion shares, making them the dominant participants in the loan market. The diverging strategies have heightened volatility in South Korea’s stock market.

Han Eun‑uk, deputy head of the BOK’s Financial Statistics Department, noted that the foreign sell‑off was a reaction to the market rally, while bond buying was spurred by the inclusion of Korean bonds in the world‑government‑bond index. Industry observers warned that the rapid rise in both credit and borrowing balances signals sharply opposed market sentiment, which could amplify price swings.