South Korean Stocks Suffer Record Foreign Selloff Amid AI Jitters

By Jihye Lee

Foreign investors sold a record amount of South Korean stocks in June, extending their selling streak to a fifth consecutive month as the market's AI-led rally stumbles.

Overseas investors sold a net $32.37 billion of South Korean equities last month, the largest amount since the Bank of Korea began compiling the data in 2008, the central bank said Tuesday.

The outflows accelerated from May as concerns about heavy investment in artificial-intelligence infrastructure weighed on sentiment, the BOK said. Recent gains in South Korean stocks also prompted foreign investors to book profits and rebalance their portfolios, the central bank added.

Foreign investors have been net sellers of South Korean equities since February, when the benchmark Kospi index staged a record-breaking rally. The index has hit a series of new highs over the year, but the path upward hasn't been smooth, with authorities stepping in numerous times to curb volatility when swings in either direction became excessive.

Earlier this month, the Kospi slipped into bear-market territory, tumbling alongside other tech-heavy markets as investors fret that the AI hype won't translate to economic and profitability gains.

Higher oil prices and higher yields as geopolitical tensions flare again are likely partly to blame for the Kospi's woes too, said Ipek Ozkardeskaya at Swissquote. The selloff may also simply reflect a correction following the parabolic rally in the country's memory-chip makers, she added.

Kospi trends have implications for the won too, as overseas investors' conversion of local proceeds into foreign currencies can create downward pressure on the Korean currency.

Citi Research economist Jin-wook Kim said the relationship between Korean equities and the won has started to look like that of Japanese stocks and the yen, with market gains potentially prompting portfolio rebalancing and currency-hedging.

While capital outflow pressure from foreign equity investors moderated amid the recent Kospi correction, that could re-accelerate if the market rebounds, Kim said.

South Korean bonds, meanwhile, continue to attract overseas buyers. Foreign investors bought a net $1.65 billion of South Korean bonds in June, the BOK report showed, partly supported by the country's phased inclusion in the World Government Bond Index.

Write to Jihye Lee at jihye.lee@wsj.com

(END) Dow Jones Newswires

July 14, 2026 03:54 ET (07:54 GMT)