The South Korean stock market experienced high volatility, with foreigners selling off $1.3 billion in a single week, dragging the Kospi index down.

The South Korean stock market experienced high volatility, with foreigners selling off $1.3 billion in a single week, dragging down the Kospi index and forcing a temporary trading halt. Analysts warn the market is becoming overheated.

On May 18, 2569 at 09.48:XNUMX a.m., CNBC reported that The South Korean stock market faced severe volatility. Following a sell-off by foreign investors in South Korean stocks totaling US$13,200 billion last week, the Kospi index experienced significant volatility, prompting the market to temporarily halt trading.

The Kospi index plunged up to 4% in early Monday trading, following a more than 6% drop on Friday. Goldman Sachs said the correction erased a week of gains driven by the Donald Trump-Xi Jinping summit, along with heavy foreign capital outflows. Meanwhile, the Kospi Volatility Index, which measures South Korea's stock market volatility, surged 2.56% to near its highest level since early March.

Data from Goldman Sachs indicates that foreign investors withdrew approximately $17,000 billion from emerging Asian stock markets (excluding China) last week, marking the second-largest outflow on record. South Korea saw the largest sell-off at $13,200 billion, followed by Taiwan at $2,500 billion.

South Korea's stock exchange had to temporarily activate a sidecar mechanism after Kospi 200 index futures plunged 5%. This automatic trading halt, lasting five minutes, was implemented to curb market panic. The Kospi index had just surpassed 8,000 points for the first time last week, driven by speculation in AI-related stocks, semiconductor stocks, and retail buying.

However, strategists at Citigroup believe the South Korean stock market is beginning to enter a phase... "Overbought" Outperforming the US stock market, we decided to reduce our investment weighting in the South Korean market somewhat.

Citigroup stated that while it's too early to consider the bull market to be over, as interest rates remain supportive, the Kospi rally is excessive and investors should begin to take profits. They also warned of signs of overzealousness among South Korean retail investors, who have become a major driving force in the market this year, favoring margin trading and leveraged ETFs.

Citigroup emphasized that this does not mean that investing in the South Korean stock market is over, but that the risks have increased significantly.

Analysts also point out that soaring global government bond yields, along with geopolitical tensions and rising oil prices stemming from the conflict with Iran, are putting pressure on several Asian stock markets that had previously shown strong gains.

Nevertheless, both Goldman Sachs and Citigroup still see potential for further recovery in the South Korean stock market. Goldman Sachs estimates that South Korean retail investors bought over $14,100 billion worth of shares last week, while Citigroup believes the South Korean market can still receive support from passive fund inflows following future MSCI Inc. index rebalancing.

refer : cnbc.com

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