Korea Exchange CEO: Foreign Selling Is Rebalancing, Not Loss of Confidence
0xBroomberg
KRX CEO Jung Eun-bo says the foreign sell-off in Korean stocks stems from portfolio rebalancing, not fading conviction. The Kospi dropped over 13% in six sessions, triggering a circuit breaker — but he believes the unwind is nearly done.
Why did foreign investors suddenly dump Korean stocks?
The Kospi rose 76% in all of 2025, then surged another 108.85% to a record high by June 2 — nearly doubling or tripling Korea's weight in global institutional portfolios.
This means → fund managers aren't turning bearish on Korea. The rally pushed Korean holdings past risk-control limits, forcing mechanical sell-downs to bring weights back to target.
In plain terms = if one stock swells from 5% to 15% of your portfolio, compliance rules make you trim the excess — regardless of your view on the stock.
How large is the sell-off and what damage has it done?
Goldman Sachs estimates net foreign outflows from the Kospi reached roughly $62 billion through end-May. On one June morning alone, offshore investors net-sold about ₩1.24 trillion (~$801 million).
The Kospi fell more than 13% over six sessions from its June 2 peak; on Monday it dropped over 8% intraday, triggering a circuit breaker — an automatic trading halt designed to cool panic selling.
The won slid in tandem, hitting 1,561.5 per dollar on June 5 — a 17-year low. This reflects the won's vulnerability as a non-reserve currency: when capital flows out, the exchange-rate cushion is thinner.
Why are semiconductors the amplifier?
Samsung Electronics and SK Hynix together account for roughly 45% of the Kospi's weighting — nearly half the index rides on two chip companies.
The semiconductor industry is inherently cyclical, swinging between boom and bust on supply-demand mismatches. Layered on top of that concentration, one cycle turn can drag the entire index down.
Jung attributed the volatility to a triple overlap: Middle East geopolitical conflict + Korea's high economic dependence on external demand + the semiconductor cycle itself.
Is the rebalancing really almost over?
Jung said meetings with major foreign institutional investors delivered a consistent message: "This is a rebalancing operation, not a loss of conviction in Korea." He believes the unwind is nearing its end.
Goldman Sachs raised its 12-month Kospi target from 9,000 to 12,000. Jung cited this as evidence that "Korea's significant upside potential is gaining international recognition."
The unresolved question: whether the rebalancing is truly winding down or more selling lies ahead — this remains the key test for whether the Kospi can stabilize.
How are regulators responding?
Jung said the KRX will review whether trigger thresholds for sidecars (temporary single-stock halts) and circuit breakers need adjustment, given the current environment of elevated global volatility.
On the currency front, authorities are already "actively conducting smoothing operations" and expect the forex market to normalize gradually as rebalancing pressure fades.
This means → regulators are neither intervening directly to prop up share prices nor standing aside — the focus is on calibrating market mechanisms, not mounting a rescue.
Content is for reference only, not financial advice.