Stock Market Impact: Record foreign equity outflows of about $70 bn in H1 2026, despite KOSPI’s strongest H1 performance since 1999, created a 20‑standard‑deviation divergence from historical flow‑return relationship, pressuring the KRW and market sentiment.
Listed Companies and Sectors: Samsung Electronics and SK Hynix surged ~225 % YTD, together representing roughly $60 bn of the $68 bn outflows, breaching single‑stock exposure limits and triggering mechanical rebalancing by global funds.
Investment Flows: UBS projects total 2026 outflows near $120 bn, with an additional $50 bn expected in H2; daily non‑resident flow volatility has risen to ~$1.4 bn (vs $0.4 bn in 2021‑25). NPS foreign‑exchange hedging could provide $20‑30 bn support.
Interest Rates, Inflation, Liquidity: KRW has absorbed a 1.4 % drag per $10 bn outflow; UBS values KRW >10 % undervalued across REER, JPY/KRW, USD/KRW, and NEER metrics. Expected BOK policy rate pricing at 3.7 % and a fall in VKOSPI volatility from ~70 to 30‑40 are conditions for KRW to reach fair value (~1,400 per USD).
Fiscal or Monetary Policy: Korea’s current‑account surplus exceeds 20 % of GDP (four‑times the 2025 average), cushioning the impact of outflows; without it, outflows equivalent to ~8.2 % of GDP could have weakened KRW further or reduced FX reserves.
