“한국 주식에 투자하고 싶은 선량한 투자자라면 당연히 공정한 질서가 됐기 때문에 (공매도) 재개 이후 훨씬 더 많이 투자할 것으로 예상합니다.”In June 2024, Kim So-young, vice chairman of the Financial Services Commission, said, “For good investors who want to invest in Korean stocks, it is natural that they will invest much more after the resumption of short selling due to a fair order.”
Foreign investors sold a net nearly 11 trillion won in the Korean stock market throughout April after the resumption of short selling at the end of March. The forecast from financial authorities that foreign funds would flow in greatly upon the resumption of short selling has so far not materialized. As the net selling by foreigners surged, the National Pension Service and other pension funds also expanded their net buying in response.
According to the Korea Exchange on the 29th, foreign investors have maintained a 'selling' trend for nine months from August of last year to this month in the Korean stock market. Looking at the net selling amount over the most recent five months, it amounts to 2.324 trillion won in December 2024, 1.444 trillion won in January 2025, 4.124 trillion won in February, and 2.164 trillion won in March.
However, entering April, the net selling amount surged to 10.75 trillion won (based on the closing price on the 28th). Although there are still two trading days left until the 30th, the size of the net selling is so significant that the nine-month consecutive net selling by foreigners is already seen as definitive. Analysis suggests that the combination of tariff conflicts stemming from the Trump administration and the resumption of short selling has exacerbated the outflow of foreign investors.
Kim So-young, vice chairman of the Financial Services Commission, attended a briefing with foreign correspondents at the Government Seoul Complex in Gwanghwamun on the 21st. When a question was raised about the continuing net selling by foreigners despite the resumption of short selling, she noted, “It is because the overall economic situation has worsened, and foreigners have exited significantly regardless of short selling.”
The National Pension Service and other pension funds have also strengthened their role as a lifeline in response to the bombshell of net selling by foreigners. In the domestic stock market, pension funds had been reducing their net buying amounts, with 2.506 trillion won in December of last year, 1.876 trillion won in January this year, 1.801 trillion won in February, and 200 billion won in March. However, as foreigners sold nearly 11 trillion won in April, pension funds increased their net buying amount to 2.378 trillion won.
At the center of the 'Buy Korea' initiative by pension funds is the National Pension Service. The National Pension Service has aggressively purchased domestic stocks since the second half of last year. As the index fell at the time, the proportion of domestic stocks held by the pension fund was far below its target (15.4% in 2024), prompting them to start buying to bridge the excessive gap between the actual holding proportion and the target.
Market experts estimate that the National Pension Service's proportion of domestic stocks is around 13%. Additionally, according to the medium-term asset allocation plan of the National Pension Service, the target proportion for domestic stocks by the end of this year is 14.9%. Although the period of being a lifeline for the National Pension Service has been prolonged due to the large-scale net selling by foreigners this month, market evaluations suggest that the adjustment of the National Pension Service's proportion is gradually nearing completion.
Ultimately, the rebound of the Korean stock market depends on how long foreigners continue their selling trend. The market views the declining intensity of net selling by foreigners hopefully. Earlier this month, the daily net selling by foreigners reached between 1 trillion and 2 trillion won, but as the month approaches its end, it has decreased to between 100 billion and 200 billion won.
Furthermore, the inflow of foreign capital into Korean won bonds, unlike stocks, is also cited as a factor that increases market expectations. A securities industry official commented, “It seems that foreigners prefer safe assets, but they have not left the Korean market itself.”