Global funds dump nearly 7 trillion won of South Korean stocks after rally

Published Fri, Feb 27, 2026 · 06:03 PM

[SEOUL] Global investors offloaded a record amount of South Korean equities on Friday (Feb 27), in a sign of profit taking after the equity benchmark rallied nearly 50 per cent this year.

Foreign funds sold a net 6.8 trillion won (S$6 billion) worth of Kospi stocks during the regular session, according to data by the Korea Exchange. The Kospi Index fell 1 per cent to snap a six-day winning streak. Local institutions and retail investors, meanwhile, were net buyers.

Korean stocks have been on a tear, trouncing other markets as the benchmark soared 170 per cent since an April low. Home to Samsung Electronics and SK Hynix, the country has been a direct beneficiary of the memory boom, sidestepping turbulence even as the so-called “AI scare trade” rattled investors elsewhere. Yet the relentless rally driven by a handful of stocks has started to look precarious to some.

“A large sell number tells you sentiment is being reset and positioning is being cleaned up,” said Charu Chanana, chief investment strategist at Saxo Markets. “Memory upcycle has been a clear narrative, so when volatility rises, the quickest move is to reduce exposure in crowded trades. That can create big flow prints even if fundamentals are intact.”

The gauge soared past the 6,000 threshold this week, just a month after surpassing President Lee Jae-myung’s political goal of 5,000. The country’s market valuation even exceeded that of European heavyweights Germany and France. The frenzy to gain exposure to Korean names caused abnormal moves and volumes in exchange-traded funds listed overseas.

Despite the massive selling by foreigners, few see this as a bearish turning point. Kospi still trades at 10.4 times forward earnings estimates, compared to S&P 500’s 21.3 and MSCI Asia-Pacific at 15.3.

The corporate governance reform is also making headway. The parliament this week approved a long-debated legal revision requiring companies to cancel treasury shares. A day later, the president urged a revamp in inheritance tax rules to keep boosting capital markets.

A month-end rebalancing of benchmarks and profit-taking after the breakneck rally triggered the pullback, said Kim Namho, a fund manager at Timefolio Investment Management in Seoul. “Even so, consensus holds that Korean equities remain undervalued, with ample upside after this pause.”

Yuanta Securities said MSCI’s rebalancing scheduled for Friday would trigger weight adjustments in funds such as the US-listed iShares MSCI South Korea ETF after Samsung Electronics’ weight exceeded the 25 per cent cap set by regulators. Samsung shares have surged 80 per cent so far this year.

Retail participation is also accelerating, suggesting further upside potential. Investor deposits at the nation’s brokerages – cash available for stock purchases – rose to a new all-time high of 119.5 trillion won, according to Korea Financial Investment Association data.

“There will be opportunities in South Korea amidst any extended sell-off, and we’ll be there as long-term investors,” said Vikas Pershad, an Asian equities portfolio manager at M&G Investments. BLOOMBERG