The surge in buying reflects renewed optimism in the legacy semiconductor sector, bolstered by Morgan Stanley’s recent upgrade of its outlook on Korean chipmakers. (Image created by AI/ChatGPT)
SEOUL, March 29 (Korea Bizwire) — In the first quarter of 2025, foreign investors significantly increased their holdings in South Korean semiconductor and defense stocks, led by SK Hynix, while retreating from shipbuilding and automotive shares, according to data from the Korea Exchange.
From January to March 28, foreign investors were net sellers of 4.73 trillion won (approximately $3.5 billion) on the main KOSPI index. Despite the overall outflow, they poured 1.88 trillion won into SK Hynix, making the chipmaker their top pick for the quarter.
The surge in buying reflects renewed optimism in the legacy semiconductor sector, bolstered by Morgan Stanley’s recent upgrade of its outlook on Korean chipmakers.
Defense stocks also attracted strong foreign interest amid rising geopolitical tensions and heightened expectations of global military spending. Hanwha Aerospace and Korea Aerospace Industries ranked among the most purchased stocks, with 733 billion won and 208 billion won in net buying, respectively. Four of the top ten foreign-bought stocks in the quarter were defense-related.
A U.S. Marine operating Hanwha Aerospace’s multipurpose unmanned vehicle, Arion-SMET (Image provided by Hanwha Aerospace)
NAVER, POSCO Holdings, and Kakao also drew foreign capital, while shipbuilding stocks saw heavy foreign outflows. Hanwha Ocean led net sell-offs at 1.18 trillion won, followed by Hyundai Motor (790 billion won) and KB Financial Group (548 billion won).
Weak global ship orders and concerns over overvaluation prompted foreign investors to pare back positions in shipbuilders, despite their strong early-year rally tied to expectations from the Trump administration’s trade policies.
In contrast, South Korean retail investors took the opposite approach. They heavily purchased shipbuilders and automakers, with Samsung SDI, Hyundai Motor, and HD Hyundai Electric among their top buys. Hanwha Ocean, Samsung Heavy Industries, and HD Hyundai Mipo were also actively acquired.
Performance-wise, foreign investors outpaced the broader market with their picks, as nine of their top ten stock choices rose—averaging a 30.3% return, nearly five times the KOSPI’s 6.6% rise. Hanwha Aerospace and Hyundai Rotem delivered standout returns of 93% and 104.6%, respectively.
Meanwhile, retail investors underperformed. Six of their top ten holdings fell in value, delivering an average return of just 5.6%, trailing the broader index.
Analysts caution that short-term volatility may rise as the market navigates two key events next week: the full resumption of short-selling on March 31 and the U.S. imposition of reciprocal tariffs on April 2. Concerns also linger over South Korea’s possible inclusion in Washington’s “Dirty 15” list of countries with high non-tariff barriers.
Still, analysts see opportunity ahead. “Once the uncertainty clears, foreign capital is likely to refocus on semiconductors,” said Na Jung-hwan of NH Investment & Securities. “A strategy of accumulating undervalued semiconductor names remains valid.”
Lee Kyung-min of Daishin Securities added, “With valuation pressure high in sectors like shipbuilding and chemicals, investors should shift attention to fundamentally strong, oversold sectors such as semiconductors and automobiles as the KOSPI tests support near the 2,600 level.”
Ashley Song (ashley@koreabizwire.com)
