Foreign Ownership of Samsung Electronics Hits 1998-Like Low

The decline in foreign ownership of Samsung Electronics and SK hynix was found to be 1.6 to 1.8 times the overall drop seen across the KOSPI. Amid the continuous exodus of foreign investors from the domestic stock market, the decline in foreign ownership of Samsung Electronics and SK hynix was found to be 1.6 to 1.8 times the overall drop seen across the KOSPI. Foreign investors, who have net sold around 208 trillion won (about $156.6 billion) since the beginning of the year, maintained a strong selling dominance even during the downturn early this month when the KOSPI was pushed back from 7,000 points to around 5,500 points. As concerns over the debt of AI companies spread, the outflow of foreign capital from global emerging markets heavily reliant on semiconductors continues in both South Korea and Taiwan. Within semiconductor-centric emerging markets, the investment sentiment of global funds is showing no signs of improvement. According to the Korea Exchange on Oct. 20, while the KOSPI’s overall foreign ownership rate as of Oct. 19 fell by 3.54% points from its annual peak, Samsung Electronics and SK hynix plummeted by 6.41% points and 5.82% points, respectively. The proportion of foreign holdings in large-cap semiconductor stocks, which had driven the stock market’s rise this year, has contracted at a much faster pace than the market average. Foreign ownership of Samsung Electronics hit its lowest point since the start of the year at 45.98% on Oct. 16, and remained at rock bottom for the year at 45.99% on Oct. 19. This mirrors the alarming levels seen in December 1998, immediately following the International Monetary Fund (IMF) financial crisis. Even when measured against the Global Financial Crisis, this represents the lowest level in approximately 18 years since 2008. Foreign ownership of Samsung Electronics had climbed steadily since the end of last year, reaching 52.4% on Jan. 6, but it has since plunged by more than 6% points compared to that early-year peak. SK hynix, which recorded a 54.64% foreign ownership rate on Feb. 25, also broke its lowest record for the year, dropping to 48.82% on Oct. 19. The familiar sight of foreign buying accompanying rising stock prices has become difficult to find this year. Even when stock prices increased, foreign holdings showed a distinct pattern of moving in the opposite direction. Jeon Kyun, an analyst at Samsung Securities, stated, “Just last year, Samsung Electronics’ stock price and the number of shares held by foreigners moved in the same direction, with a correlation coefficient of about +90%.” He diagnosed the current situation by adding, “This year, an inverse relationship has emerged where the two indicators move in opposite directions, and the same is true for SK hynix.” This does not mean that foreign investors pivot to a distinct buying stance when the index falls. Even as the KOSPI recaptured 7,000 points on Oct. 2 and recently slid back to around 5,500 points, foreign investors sustained a net sell-off of around 1.7 trillion won. Out of the 11 trading days from Oct. 2 to 19, there were only two trading days that showed a marginal net buying advantage of around 90 billion won to 300 billion won. Since the beginning of the year, the KOSPI market has recorded a staggering net foreign sell-off exceeding 208 trillion won. The inability to halt the foreign ‘sell’ trend despite record-breaking earnings or index gains is a common phenomenon in the Taiwanese stock market, which represents global IT and semiconductor shares. Although the Taiwan Taiex has recorded a growth rate of over 60% this year, the volume of net foreign selling is more than triple the total net selling amount of last year. On Oct. 15, the single-day net selling volume hit a record high since data compilation began, reaching Taiwan $302.6 billion. The fact that its weight within the Taiwan Taiex is overwhelmingly dominant at 40%, and that earnings growth alone can no longer explain foreign capital inflows, draws a striking parallel to the situations of Samsung Electronics and SK hynix. Jung Jung-young, an analyst at Korea Investment & Securities, diagnosed, “Looking at Taiwan, foreign net buying and stock market performance shared a similar trajectory in the past, and since 2018, the quarterly foreign net buying volume moved about three quarters ahead of TSMC’s revenue growth rate.” He added, “Despite recording all-time high revenue in the third quarter of this year, foreign net selling has expanded, meaning investors are agonizing over the Taiwanese market as well as TSMC.” As the foreign investor sell-off persists in the highly semiconductor-concentrated markets of South Korea and Taiwan, global institutional investors are deepening their concerns regarding the additional upside potential of the AI industry. On Oct. 19 (local time), Mark Habib, Global Head of Digital Infrastructure at S&P Global, commented on major AI companies, stating, “It is reasonable to assume there is more debt that we are not capturing,” and cautioned, “Financial risks could escalate if expected investment returns are not realized or if competition among AI companies intensifies.” This warning comes as AI-related capital expenditures by six major AI companies are projected to exceed $7 trillion between 2025 and 2030. While the exodus of foreign investors from the domestic stock market, previously concentrated on large-cap stocks, continues, attention is shifting toward the possibility that investment demand, once heavily focused on large-cap semiconductor stocks, may disperse into KOSDAQ small and mid-cap stocks, as well as value and dividend stocks from an investment strategy perspective. Kang Hyun-gi, an analyst at DB Financial Investment, added, “In the first half of 2027, a stock-picking market could emerge where various stocks within the KOSDAQ rotate and rise, and in the second half, the healthcare sector, which has been alienated for a long time following the inversion of short- and long-term interest rates, may attract attention.” He continued, “For the transportation, insurance, food and beverage, and media sectors, a strategy that increases the weight of stocks that are relatively equipped with both value and dividend appeal, and are less impacted even if the upward and downward volatility of interest rates expands, could be advantageous.”