Kospi rebounds from 'Black Monday' as foreign selling streak hits 22 sessions

The Kospi bounced back Tuesday, pushing toward the 7,800 level after the previous session's "Black Monday" shock. A rebound in US technology stocks overnight revived investor sentiment, though foreign investors extended their net selling streak to 22 consecutive sessions. South Korea's homegrown fear gauge surged to a record high.

According to Korea Exchange, the Kospi stood at 7,740.11 as of 10 a.m. Tuesday, up 255.70 points, or 3.42%, from the previous close.

The index opened up 213.35 points, or 2.85%, at 7,697.76 before extending its gains. It briefly touched 7,847.74 intraday, reclaiming the 7,800 level.

The early surge of more than 4% triggered a temporary halt on program buy orders — known as a buy-side sidecar — on the main bourse.

While the previous session's steep losses stabilized, the ongoing foreign "sell Korea" trend and volatility at record highs remained headwinds for the market.

The KOSPI 200 Volatility Index, or VKOSPI — South Korea's equivalent of the fear gauge — jumped 12.98% to 86.58, crossing the 80 threshold. It briefly hit 87.03 intraday, the highest level since the index was first published on April 13, 2009.

Tuesday's activation marked the 23rd sidecar trigger for the Kospi this year — 12 on the buy side and 11 on the sell side.

On the main board, retail investors and institutions drove the advance, posting net purchases of 423.1 billion won (about $274 million) and 38.2 billion won, respectively. Foreign investors, by contrast, were net sellers of 477.6 billion won. They have sold on a net basis every session since May 7, a streak of 22 trading days. Their cumulative net selling in the Kospi through Monday exceeded 81 trillion won.

Market analysts say the recent foreign selling looks more like profit-taking and portfolio rebalancing after a sharp run-up in share prices than a structural exodus from Korean equities.

"The fact that the scale of foreign net selling actually shrank even as the index plunged the previous session suggests the recent selling reflects rebalancing after a sharp price surge, not a structural departure from the Korean market," said Lee Jae-won, a researcher at Yuanta Securities Korea. "Concerns about a supply-demand deterioration feeding on itself should ease."

As of June 5, foreign investors' ownership share of the Kospi remained around 40%, still above the 36% recorded at the end of last year.

"Foreign ownership of Samsung Electronics and SK Hynix is higher than the Kospi average, and as the two stocks' share of total market capitalization has grown, their ownership ratio has risen even amid net selling," said Yeom Dong-chan, a researcher at Korea Investment & Securities.

Samsung Electronics and SK Hynix rose roughly 3% and 6%, respectively, reclaiming within a single session the 300,000-won and 2,000,000-won price levels that had collapsed the previous day.

Bargain hunters moved in following the previous session's sharp drop, while the broad rally in US technology stocks overnight also lifted investor sentiment.

Among large-cap stocks, SK Square, Samsung Electro-Mechanics and Samsung Life also posted solid gains.

At the same time, the Kosdaq was up 47.60 points, or 5.22%, at 958.99.

The index opened at 937.69, up 26.30 points, or 2.89%, from the previous close, and continued to build on those gains.

On the Kosdaq, foreign investors and institutions were net buyers, while retail investors were the sole net sellers.

In the Seoul foreign exchange market, the won opened at 1,529.4 won per dollar, strengthening 5.6 won from the previous close.