Foreign investors have withdrawn approximately $110 billion from South Korea this year, prompting a shift of capital towards undervalued Chinese technology stocks listed in Hong Kong. This capital migration is seen as beneficial for Hong Kong's market, particularly for the Hang Seng Tech Index, which has rebounded about 10% since hitting a low on June 26, according to analysts.
Key Details
The Korea Composite Stock Price Index (Kospi) has entered a bear market, experiencing a decline of over 20%. This downturn has been attributed to increased scrutiny of margin trading, leading to a rush among individual investors to exit leveraged positions. Chen Gang, an analyst at Soochow Securities, noted,
The recent rebound in Hong Kong stocks is a reflection of the rebalancing of global capital.
Despite the rebound, the Hang Seng Tech Index is still down 15% year-to-date, lagging behind global peers. Major constituents of the index, such as Alibaba, JD.com, and Meituan, are more dependent on e-commerce revenue rather than artificial intelligence monetization, which has been a key driver for investor interest. In contrast, the Kospi had more than doubled in 2026 before its recent decline, while the Nasdaq 100 has risen 15% this year.
Background
The turbulence in South Korea's stock market has triggered significant selling pressure, with SK Hynix, a major memory-chip maker, accounting for about 20% of the foreign sell-off, according to South Korean government data.
The capital shift from South Korea to Hong Kong is likely to support Hong Kong tech stocks, particularly those within the Hang Seng Tech Index, as investors seek diversification. This trend could lead to increased volatility in South Korean equities, especially in the tech sector, as foreign capital continues to exit.
Investors will watch for further developments in South Korea's regulatory environment, which may influence capital flows and market stability.