Foreign investors set the record for the largest domestic stock sell-off amid Middle Eastern risks.

As geopolitical uncertainty in the Middle East grows, foreign investors recorded a record-large net sell-off of domestic stocks in March 2026, and bond investments also switched to net repayments five months later.

According to the “Foreigners’ Securities Investment Trends for March 2026” released by the Financial Supervisory Service on the 16th, foreigners net sold 43.505 trillion won worth of domestic listed stocks last month. This is more than twice the net selling amount of 19.558 trillion won in February. In terms of market, there was net selling of 43.888 trillion won on the Korea Exchange market and net buying of 3840 billion won on the KOSDAQ market. This means that foreign capital mainly withdrew from the Korea Exchange market, where there are more large-cap stocks.

This expanding sell-off is interpreted as a result of international oil prices rising due to the Middle East war, along with stronger risk-avoidance sentiment. When geopolitical instability intensifies, global investors tend to shift toward assets considered relatively safer, and during this process, the domestic stock market is also directly affected. By region, only the Middle East showed net buying of 2000 billion won, while Europe topped the list with net selling of 26.4 trillion won. Next were the Americas with net selling of 9.8 trillion won and Asia with net selling of 5.6 trillion won, indicating a larger-scale capital outflow. By country, Qatar recorded net buying of 5000 billion won, the Cayman Islands recorded net buying of 3000 billion won, while the UK recorded net selling of 16.3 trillion won and the United States recorded net selling of 9.5 trillion won, showing standout performance.

The scale of domestic listed stocks held by foreigners also fell significantly. As of the end of March, the holdings totaled 1576.2 trillion won, down 449.4 trillion won from one month earlier. In terms of total market capitalization, foreigners’ share also fell to 30.7%. Foreigners’ share is considered a key indicator for measuring the domestic stock market’s supply and demand and the direction of exchange rate movements; the decline in this ratio is interpreted as a signal that investment sentiment toward the Korean market has correspondingly weakened.

The bond market atmosphere is similar. Foreign investors recorded net buying of 5.442 trillion won in listed bonds last month, but because of repayments at maturity, they recovered 16.359 trillion won, resulting in an overall net repayment of 10.916 trillion won. Net repayment means that the funds recovered due to maturities and other reasons are greater than the amount of new investment. By region, only the Americas showed net investment of 9000 billion won; Asia showed net repayment of 7 trillion won, and Europe showed net repayment of 3.4 trillion won. By type, government bonds of 6.8 trillion won and currency stabilization bonds of 2.2 trillion won were all counted as net repayments. As of the end of March, foreigners’ holdings of listed bonds were 323.799 trillion won, accounting for 11.6% of the total listed bond outstanding balance.

Foreign capital shows the characteristic of being sensitive to external variables and fluctuating in both stocks and bonds. Therefore, if the Middle East situation, international oil prices, the won/dollar exchange rate, and the policy direction of major countries’ currencies are unstable in the short term, foreign capital volatility is very likely to continue as well. This trend in the future may lead to price adjustments in the domestic financial markets, exchange-rate unease, and a contraction in investment sentiment, so it is necessary to monitor the relevant indicators at the same time.