Foreign investors sold more than 300 billion won in the KOSPI market during trading on the 2nd. It appears that the announcement from the Institute for Supply Management (ISM) that the manufacturing Purchasing Managers' Index (PMI) fell short of market expectations had an impact.
On that day, at 11 a.m., foreign investors had a net sell of 347.2 billion won in the KOSPI market. Institutions also showed a sell predominance of 44.1 billion won, while individuals had a net buy of 352.3 billion won. Although there was a significant aspect of risk aversion ahead of the announcement of the 'reciprocal tariff' by former President Donald Trump, the overnight announcement from ISM that the March manufacturing PMI fell to 49.0 also fueled the selling pressure from foreign investors.
ISM conducts a survey of about 400 corporations' procurement and supply managers each month, then announces the manufacturing PMI. A manufacturing PMI below the benchmark of 50 indicates a contraction in the economy, while a reading above indicates expansion. The March manufacturing PMI suggests that the U.S. manufacturing sector has entered a contraction phase.
The net buying scale by foreigners shows a strong correlation with the ISM manufacturing PMI indicator. Foreign investors indicated buying dominance in the KOSPI market on the 4th of October last year, the 4th of November, the 3rd of December, and on the 6th and the 5th of January and February this year, as well as on the 5th of March. All of these occurred the day after the manufacturing PMI was announced. The manufacturing PMI reached a low of 46.5 in October of last year, then rose above the baseline of 50 in January and February of this year.
When the U.S. manufacturing sector is in an expansion phase, investments increase, and Korean exports also show growth. This is equally positive for corporate earnings and stock prices. Since October of last year, the KOSPI index has closed higher on the day after the manufacturing PMI announcements.
However, the March manufacturing PMI fell short of market expectations (49.5), and the detailed indicators were also unfavorable. New orders, production, and employment all showed a downward trend compared to the previous month, while indicators for corporate inventory, consumer inventory, and prices all increased. ISM evaluated that ahead of President Trump's announcement of reciprocal tariffs, companies prioritized orders to accumulate inventory.
As uncertainty grows, expectations for foreign investment related to the resumption of short selling are not materializing as anticipated. Foreign investors net sold 1.575 trillion won in the KOSPI market on the 31st of last month and sold another 390 billion won the day before.
It is expected that President Trump's tariff announcement will be a turning point. President Trump will directly announce the details of the reciprocal tariff at 4 p.m. on the 2nd (5 a.m. on the 3rd Korean time), known as 'Liberation Day.'