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Korean stocks held overseas hit record $651 billion after three-month foreign buying spree

Published: 07 Aug. 2025, 21:16 Updated: 08 Aug. 2025, 14:11

Currency traders watch monitors near a screen showing the Kospi, top left, and the won-dollar exchange rate at the foreign exchange dealing room of the Hana Bank headquarters in Seoul on Aug. 7. [AP/YONHAP]

For the first time, the value of Korean stocks held by foreign investors has surpassed 900 trillion won ($651 billion), driven by three consecutive months of foreign buying and a sharp Kospi rally that sent the index above 3,200 last month.

According to a report released Thursday by the Financial Supervisory Service on foreign securities investment, the total market capitalization of domestic listed stocks — Kospi and Kosdaq combined — held by foreign investors at the end of July stood at 921.609 trillion won. That accounts for 27.7 percent of the total market. Compared to the end of last year, when the figure stood at 673.747 trillion won, it marks a 37 percent increase and an all-time high.

Foreign investors have set records as they ramp up their Korean stock purchases. In July alone, they bought a net 3.411 trillion won worth of stocks on a settlement basis. That followed net purchases of 2.01 trillion won in May and 3.076 trillion won in June — marking three straight months of net buying. Until April, foreigners had sold Korean stocks for nine consecutive months.

The United States was the biggest buyer in July, with net purchases of 2.48 trillion won. Ireland followed with 765 billion won, then Luxembourg with 700 billion won and the Cayman Islands with 680 billion won. These so-called tax havens have emerged as major players in the domestic stock market.

Market analysts attribute the surge to growing optimism about the new administration’s capital market policies as well as a weaker dollar that has increased the global appetite for non-U.S. assets. Powered by foreign inflows, the Kospi soared 35.26 percent this year through the end of July, closing at 3,245.44. According to the Korea Exchange, the Kospi posted the highest year-to-date return among all Group of 20 indexes.

Kospi 500 illustration [JOONGANG ILBO]

But concerns are growing that the foreign buying spree may be short-lived. The tax reform plan the government announced on July 31 has triggered backlash. Per the proposed changes, the threshold for classifying major shareholders subject to capital gains tax will fall from 5 billion won to 1 billion won. Plans to raise the maximum tax rate on dividend income to 38.5 percent, including local income tax, and to increase the securities transaction tax have also dampened investor sentiment.

Reuters reported Thursday that global investment banks have criticized the tax overhaul as contradictory to the government’s stated efforts to reduce the “Korea discount.” JP Morgan said the proposal fell short of market expectations and warned that a reevaluation of Korean equities will only be possible with improved corporate earnings or additional capital inflows. Citibank also warned in a report released Sunday that the recent Kospi rally had been driven by expectations of pro-market reform, so the index could fall further under the new plan.

Indeed, the day after the government unveiled its reform plan, foreign investors sold a net 654 billion won worth of Kospi-listed stocks in a single day. The Kospi plunged nearly 4 percent. With criticism mounting at home and abroad, the Democratic Party's leadership has left open the possibility of reconsidering parts of the tax proposal.

Still, some analysts believe foreign buying may continue for the time being.

A Woori Bank dealing room in central Seoul [WOORI BANK]

“Once foreign funds start to flow in, the trend tends to last close to a year,” said Park Sang-hyun, an economist at iM Investment & Securities. “If the government can present policies that strengthen Korean companies’ future growth engines and improve earnings, the flow of foreign capital is unlikely to reverse.”

Foreign investors were also net buyers in the domestic bond market for the sixth consecutive month.

According to the Financial Supervisory Service, they purchased a net 12.816 trillion won of listed bonds in July and redeemed 9.816 trillion won, resulting in a net investment of 3 trillion won. As of the end of last month, their total bond holdings had reached 307.741 trillion won. Combined with their equity holdings, the total value of foreign investment in Korean stocks and bonds stood at 1,229.35 trillion won — the highest on record.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY YEOM JI-HYEON [[email protected]]