AI craze drives record quarterly foreign flows to South Korean stocks

INVESTORS’ frenzy over artificial intelligence (AI) drove the largest quarterly foreign inflow to South Korean shares, contributing to a global rally in AI-related stocks.

Overseas investors bought a net US$12.2 billion of local stocks in the first three months of 2024, a total that trails only Japan in Asia, according to Bloomberg-compiled data. Their favourites were the chipmakers active in the global AI supply chain – such as Samsung Electronics, which drew US$4.1 billion, and SK Hynix, which attracted US$1.3 billion.

Those wagers propelled foreign ownership of the benchmark Kospi to 34.42 per cent as at Mar 28, the highest since the second quarter of 2021, according to data from the Korea Financial Investment Association.

There may be room for more inflows, Goldman Sachs Group analysts including Timothy Moe noted in a recent report. Kospi’s foreign ownership remained “light” as US$50 billion of investment fled the country between 2020 and 2022, they wrote.

Given Korean equities’ recent run – Kospi gained 4 per cent in March – investors may take profit in the coming weeks, Lee Kyoung-min, an analyst at Daishin Securities said. But global investors will likely continue to buy on an annual basis, Lee said.

“Foreign investors are expected to keep buying Korean stocks in the cash market as there is momentum from the AI and rising visibility from the memory sector’s turnaround,” he said.

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SK Hynix, the nation’s second-biggest chipmaker, recently forecast positive momentum in AI memory to extend into 2025. BLOOMBERG