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The government's plan to adopt the Corporate Value-up Program, announced on Jan. 24 to bolster the stagnating stock market, is drawing contrasting reactions from foreign investors and domestic retail investors. While foreign investors are amassing shares, retail investors are shifting their investments abroad after obtaining profits from the domestic market.

According to the Korea Exchange, foreign investors have net purchased shares worth 6.7 trillion won ($5 billion) from Jan. 25 to Wednesday, while domestic investors have sold off 6.4 trillion won in the stock market.

Initially, foreign investors focused on undervalued stocks with low price-to-book ratios (PBR), such as Hyundai Motor, Kia, Samsung C&T, and KB Financial Group. However, after the Lunar New Year, they began to shift their strategies toward technology and growth stocks, demonstrating expectations for higher returns in the Korean market.

As of Wednesday, foreign investors have recorded net buying in the domestic market for 12 consecutive trading days.

"Despite concerns of the U.S. Federal Reserve delaying the interest rate cut, there is continued expectations over the recovery of the semiconductor industry, leading to a net inflow of funds," an official from the Bank of Korea explained, noting that the net inflow of foreign investment funds into securities reached $4.4 billion in January.

However, at the same time, retail investors sought to exit the Korean market, disappointed by the domestic market's sluggish performance this year.

Employees work at the dealing room of Hana Bank's headquarters in central Seoul, Wednesday. Newsis

Notably, retail investors unloaded 1.8 trillion won worth of shares in Hyundai Motor, which had been the leading stock in terms of net purchases by foreigners before the Lunar New Year. The stocks that saw the highest net sales by retail investors, including Kia and Samsung C&T, largely matched those experiencing the highest net purchases by foreigners.

After making their profits from the domestic market, individual investors shifted their investments to foreign stock markets, including the United States and Japan. Both have shown record-high performances post-pandemic.

According to the Korea Securities Depository, investors net purchased $534.79 million in the U.S. stock market between Jan. 31 and Feb. 6. This marks the highest volume of net purchases post-pandemic.

Market observers anticipate that the buying spree of foreign investors in Korea will continue for some time.

"Most importantly, the significant reason anticipated for the sustained net purchases of domestic stocks by foreign investors is the improvement in the semiconductor industry cycle," Park Sang-hyun, an economist at Hi Investment & Securities, said. "The anticipation surrounding domestic companies' value-up program will also positively influence the additional influx of foreign capital into the domestic market."

Park forecast that global investors' preference for risk assets, even in the face of a strong dollar, would influence this trend. This would be further supported by the positive developments in the global economy, highlighted by robust stock market performances in Japan and Taiwan.

Announced by the Financial Services Commission on Jan. 24, the Corporate Value-up Program aims to elevate the corporate value of companies listed on the domestic bourse, thereby revitalizing the sluggish market. Details of this initiative are expected to be released this month.