Foreign investors dump $11B in Japanese stocks as Asian tech selloff deepens

Foreign investors sold a net ¥1.82 trillion in Japanese stocks in the week ended June 27, the sharpest weekly outflow in about three months, according to finance ministry data.freemalaysiatoday+1
In South Korea, overseas investors set a single-session record by net selling 7.7 trillion won on June 29, overwhelmingly in Samsung Electronics and SK Hynix.chosun+1
Domestic buyers have absorbed much of the selling, with Japanese retail margin buying hitting a 30-year high and Korean individual investors countering foreign outflows.cryptobriefing+1

Foreign investors pulled back sharply from Asian equity markets last week, offloading ¥1.82 trillion ($11.2 billion) in Japanese stocks during the week ended June 27 — the largest weekly foreign selloff since March — as a months-long technology rally showed signs of exhaustion amid growing doubts over the sustainability of artificial intelligence spending.tradingeconomics+1

Tech Rout Spreads Across Asia

The selling accelerated on Thursday, as South Korea's Kospi sank 5.1%, with Samsung Electronics tumbling 6.4% and SK Hynix losing 7.7% following an overnight rout in U.S. chip stocks. Micron Technology fell 10.6%, Intel dropped 9%, and AMD Advanced Micro Devices, Inc. lost 6.9% on Wall Street on Wednesday.abcnews

Japan's Nikkei 225 shed 1.5%, while Taiwan's Taiex declined 1.1% as TSMC slipped 1.8%.abcnews

The foreign exodus from Korean equities has been relentless. On June 29, overseas investors conducted a record single-session net sale of approximately 7.7 trillion won on the Kospi, concentrated overwhelmingly in Samsung Electronics and SK Hynix. Foreign selling continued into July, with 1.46 trillion won offloaded on Wednesday alone, marking an eighth consecutive day of outflows.chosun+2

Domestic Buyers Step In

Retail and institutional investors in both countries have absorbed much of the selling pressure. In South Korea, individual investors have purchased tens of trillions of won in recent weeks to counterbalance foreign outflows, helping defend the Kospi above key support levels. Japanese retail investors, meanwhile, have pushed margin buying to ¥6.39 trillion in May — a 30-year record — signaling persistent domestic appetite for equities despite the foreign retreat.ajupress+1

The divergence between foreign selling and domestic buying underscores what analysts describe as mechanical portfolio rebalancing rather than a fundamental loss of confidence. Goldman Sachs The Goldman Sachs Group, Inc. and Korean market officials have characterized the outflows as profit-taking after an extraordinary rally — the Kospi has gained roughly 85% year-to-date, while the Nikkei 225 is up about 34%.cnbc+1

Structural Forces at Play

Economists at Capital Economics warned Thursday that "AI demand may continue to grow but at a slower pace than expected," adding that "firms and investors may be underestimating the barriers to AI adoption." The caution comes as semiconductor stocks, which drove much of the rally in Japan and South Korea this year, face questions about whether massive capital expenditures on AI infrastructure will generate returns quickly enough to justify current valuations.abcnews

The Japanese yen, meanwhile, hovered near 40-year lows against the dollar at around 162 per dollar, squeezed by rising Fed rate-hike expectations that have also weighed on regional currencies.reuters+1

Sources (57)