Japan Draws $56.7 Billion of Foreign Buying While Korea Is Left Out

Buying Japan and Taiwan, Shunning Korea

AI Optimism Drove the Divide

Foreign Investors Favor Japan and Taiwan

Over Korea’s Memory-Heavy Market and Narrower Value Chain

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A clear divergence has emerged this year in foreign fund flows across Asian equity markets, separating South Korea from Japan and Taiwan. All three markets are heavily weighted toward large technology stocks, leaving them vulnerable to shifts in U.S. interest-rate expectations and changes in the AI and semiconductor cycle. But while foreign investors returned as major net buyers after selloffs in Japan and Taiwan, they kept selling Korean stocks on net throughout the year.

Foreign investors, including Chinese investors, were net sellers of NT$1.276 trillion, or about $39.8 billion, in Taiwanese stocks this year, according to the Taiwan Stock Exchange on Oct. 2. The selling came as investors took profits after Taiwan Semiconductor Manufacturing Co., which accounts for roughly half of the Taiex by market value, surged 57.73% this year.

The monthly pattern in Taiwan was more mixed. Foreign investors sold a net NT$968.2 billion in March, then turned net buyers for two straight months in April and May. They later sold a net NT$601.8 billion in June and NT$640 billion in July before buying NT$356.8 billion in August. The return of buying coincided with renewed optimism over the AI value chain.

Japan has been the most favored market in Asia among foreign investors this year. Overseas investors bought a net 9.0446 trillion yen, or about $56.7 billion, of Japanese stocks through Sept. 25, according to Japan Exchange Group. The Nikkei 225 has risen 31.79% this year, about half the 62.51% gain in South Korea’s Kospi. Even so, foreign investors posted steady net buying in all months except March, June, August and September.

In the securities industry, a broader view is taking hold that as AI development advances, Taiwan’s foundry-led market and Japan’s market, with wider exposure to equipment and materials, stand to benefit more than South Korea’s market, which is concentrated in memory chips. In Bank of America’s August survey of Asian fund managers, 27% of respondents picked Taiwan as the market likely to benefit most from the next phase of the AI cycle. Japan followed at 23%. South Korea ranked fifth at 9%, behind China and the U.S., which each drew 18%.

Beom-jin Jeon, Korea Economic Daily reporter, forward@hankyung.com