Artificial Intelligence Boom Drives Foreign Inflows to Korean Stocks at Quarterly Highs

(Bloomberg) - An investor frenzy over artificial intelligence pushed South Korean stocks to the biggest quarterly inflow of foreign capital, fueling a rebound in artificial-intelligence-related stocks globally.

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According to data compiled by Bloomberg, overseas investors bought a net US$12.2 billion of local stocks in the first three months of 2024, second only to Japan in Asia. They favored chipmakers active in the global AI supply chain, such as Samsung Electro-Mechanics (which attracted US$4.1 billion) and SK Hynix (which attracted US$1.3 billion).

The bets boosted foreign ownership of the benchmark Kospi index to 34.42% as of March 28, the highest since the second quarter of 2021, according to the Korea Financial Investment Association.

In a recent report, Goldman Sachs Group analyst Timothy Moe and others noted that there may be room for more inflows. They wrote that the Kospi Index's foreign ownership remains "low" due to $50 billion in investment outflows between 2020 and 2022.

Kyoung-Min Lee, an analyst at Daishin Securities Co., says investors may take profits in the coming weeks, given the recent trend in the Korean stock market (the Kospi index rose 4% in March). But global investors will likely continue to buy every year, he said.

"It is expected that foreign investors will continue to buy Korean stocks in the spot market as the momentum of AI and the visibility of the turnaround of the built-in industry continue to grow," he said.

SK Hynix, South Korea's second-largest chipmaker, recently predicted that the positive momentum for AI storage will continue through 2025.

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