Foreigners buy Samsung Electronics for four days despite semiconductor pessimism

While individual investors and ETFs engaged in panic selling due to semiconductor industry fears, foreign investors have purchased Samsung Electronics in large volumes for four consecutive days.

The recent sharp decline in the South Korean stock market was driven by the intersection of two distinct phases. The first phase involved macro variables triggered by the release of the United States Consumer Price Index (CPI). As U.S. housing cost indicators came in higher than expected, concerns over rising interest rates grew, prompting global macro funds to engage in "asset reallocation"—reducing risk assets and buying bonds according to programmed strategies. This process resulted in an unusual adjustment where both stocks and bonds fell simultaneously.

"Mechanical selling caused by housing cost noise"... Movement of macro funds

Lee Seon-yeop, CEO of AFW Partners, analyzed the causes of the recent market decline during an interview with "Understanding: All the Knowledge in the World." According to Lee, the decisive factor in the first week of decline was the high proportion of housing costs within the U.S. core inflation. Housing costs are considered an indicator of inflation stickiness because once they rise, they are difficult to bring down. While the market expected housing costs to stabilize, global macro funds reacted immediately when higher-than-expected figures were released.

Lee explained, "Some macro funds are programmed to mechanically dump risk assets if housing cost figures exceed a certain threshold, such as 0.3%." He added, "Rather than determining whether the figures were temporary noise, they responded by selling stocks and buying bonds according to the set parameters." At the time, U.S. housing costs rose by 0.4%, driving core inflation up by more than 0.1 percentage points, which shocked the market in conjunction with rising oil prices. This led to an asset allocation phenomenon where stock prices fell even as interest rates declined.

Foreigners buy Samsung Electronics for 4 consecutive days amid semiconductor pessimism

The second phase was the "psychological fear" created by pessimistic reports and videos. As theories regarding a crisis in the semiconductor industry spread through media and YouTube, individual investors engaged in panic selling. However, Lee pointed out that market fear was excessive based on actual supply and demand data. While it was said in the market that foreigners were leaving South Korea, the actual data showed the exact opposite trend.

"Far from leaving, foreigners have actually purchased Samsung Electronics in large volumes for four consecutive days," Lee stated. "While pessimism that the semiconductor era was over was pouring out, foreigners were continuing to buy Samsung Electronics." He explained that the recent plunge was not caused by selling from foreigners, but rather a situation where foreigners absorbed the volume dumped by individual investors and ETFs gripped by extreme fear. In particular, during the period when semiconductor pessimism was dominant, foreigners continuously accumulated Samsung Electronics, absorbing the selling volume from individuals.

"Do not look only at Korean indicators; compare with similar U.S. companies"

Lee emphasized that investors should not be swayed by provocative news or biased information when judging the market. He diagnosed that the South Korean market has structural limitations, making it difficult to encounter diverse perspectives from professional reporters or foreign media, which often causes misinformation to amplify fear. "While foreign media presents both positive and negative views, domestic media tends to selectively report only provocative negative news," he added. "This often leads to investors making incorrect judgments."

Lee advised, "Investors should not be buried in Korean indicators alone but should judge the market objectively by comparing the stock price trends and supply and demand indicators of similar companies in the United States." He suggested that since the profit outlooks for Samsung Electronics and SK hynix are rising even though their stock prices have fallen to past levels, identifying the primary actors in supply and demand is key to reading the market's direction. He also recommended a cautious approach, citing the U.S. midterm elections on November 3 and oil price trends following U.S.-Iran negotiations as future variables.

Source: original video (YouTube)