Foreign Investors Sell Korean Stocks for Fifth Month as U.S. 10-Year Yield Hits 5.29%

* Editor's note: "AI PRISM" (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. Foreign Investors Dump 21.5 Trillion Won in September, Starting With Samsung and SK hynix

- Key points: Foreign investors sold a net 21.5108 trillion won worth of KOSPI shares in September, extending their selling streak to five months. The selling was concentrated in large-cap chip stocks, with SK hynix (000660) and Samsung Electronics (005930) accounting for 76.6% of September's total net selling. The U.S. 10-year Treasury yield climbed to 5.29% in intraday trading on the 29th, its highest level since 2007. Analysts said the move has reduced the relative appeal of emerging market equities and added to valuation pressure on growth stocks.

2. Fed's No. 2 Says Rate Hike "Not Right Away," Shifting Weight to October Hold

- Key points: New York Federal Reserve Bank President John Williams said one more rate increase this year would be appropriate but that there was no reason to rush. Having already delivered a 0.25 percentage point increase at the September meeting, the Fed has gained time to gather more information, he said, ruling out a move in October. Immediately after the remarks, the probability of a hike at the October meeting priced into federal funds futures fell to about 50% from roughly 70%. Consumer and labor indicators are also slowing, with the September consumer confidence index at 81.9, the lowest since April 2014.

3. Countdown to MSCI Review: Zero Candidates for Inclusion Amid Weak Market

- Key points: Not a single stock met the market capitalization threshold for inclusion in the November review of the MSCI Korea Index. Seven stocks, including GS (078930), Samsung E&A (028050), LS (006260) and Jusung Engineering (036930), were on the list of potential candidates, but all fell short of the 13.3259 trillion won cutoff estimated by Hana Securities. LG Uplus (032640) and Yuhan (000100), by contrast, have entered the zone at risk of deletion, and the possibility that an existing constituent's exit could open a slot remains a variable. Kim Dong-young, an analyst at Samsung Securities (016360), said that with market volatility subdued, this is a reasonable time to use MSCI events as part of an alpha strategy, which seeks returns above the market average.

4. "Cutting Deficit-Financing Bonds by More Than 10 Trillion Won This Year Would Send a Rate-Stability Message"

- Key points: With national tax revenue surging by more than 63 trillion won this year, market attention has shifted to how much of the excess revenue will go toward reducing treasury bond issuance. Cho Yong-gu, senior analyst at Shinyoung Securities (001720), said conditions allow issuance to be cut by at least 10 trillion won and as much as 12 trillion to 13 trillion won over the remainder of the year, adding that a reduction of at least 10 trillion won would be needed for the market to view the step as meaningful. Cumulative treasury bond issuance from January through September stood at 179.7 trillion won, or 79.6% of the 225.7 trillion won annual plan, lagging the five-year average completion rate by 5.9 percentage points. On news of the planned reduction, the three-year yield closed at 4.011% and the 10-year at 4.407%, both lower than the previous session.

5. Bank of Korea to Buy 200 Billion Won of Physical Gold This Year

- Key points: The Bank of Korea will buy about one ton of domestically produced physical gold as early as December. If the purchase goes through, it would be the first since February 2013, a gap of 13 years, and one ton of gold is valued at roughly 200 billion won. Because the gold will be bought with won rather than foreign currency, the central bank can add to its safe-asset holdings without any dollar outflow. As of the end of August, the Bank of Korea held 104.4 tons of gold, equal to just 1.1% of total foreign exchange reserves and ranking 39th in the world.

6. Fractional Investment Gains Taxed as Dividends: "Parity With Listed Stocks Needed"

- Key points: Ahead of the institutionalization of security token offerings (STOs, securities issued using distributed ledger technology) in February next year, calls are growing to overhaul the tax treatment of fractional investment products. Trading gains of small shareholders in listed stocks are exempt from tax on the exchange, but profits from fractional investments, such as non-monetary trust beneficiary certificates and investment contract securities, are subject to 15.4% withholding, including local income tax. If annual interest and dividend income exceeds 20 million won, triggering comprehensive taxation of financial income, a top rate of 49.5% can apply. Other tasks cited include bankruptcy remoteness arrangements that prevent invested assets from being used to repay debts if an issuer goes bankrupt, as well as securing trading volume in the secondary market.