Foreign Investors Pull Record $13.5 Billion from South Korean Stocks in February Amid AI Bubble Concerns

Record Monthly Outflow from South Korean Equities​

Foreign investors pulled a record amount of capital from South Korean equities in February, reflecting growing caution among global investors about potential overheating in artificial intelligence related stocks and a wave of profit booking after recent market gains.

Data released by the Bank of Korea (BOK) on Thursday showed that offshore investors sold a net $13.5 billion worth of South Korean equities during the month. This followed net selling of $500 million in January.

The February outflow marked the largest monthly withdrawal of foreign funds from the country’s stock market on record. It surpassed the previous high of $11.04 billion recorded in March 2020.

Bond Market Sees Strong Foreign Inflows​

While equities witnessed heavy selling, foreign investors increased their exposure to South Korean bonds. Overseas investors purchased a net $5.74 billion worth of local bonds in February, compared with $2.44 billion in January.

The rise in bond purchases indicated a shift in investor preference toward fixed income assets as market interest rates increased.

Overall Capital Flows Turn Negative​

Combining both equities and bonds, foreign investors recorded a net outflow of $7.76 billion from South Korean securities in February. This reversed a net inflow of $2.39 billion seen in January.

Despite the large stock market sell-off, the overall outflow was the second-largest monthly withdrawal since July 2008, when foreign investors pulled a record $8.97 billion from local securities.

According to Kim Bo-seok, chief of the international financial trends team at the Bank of Korea, the sharp equity outflow was driven by caution surrounding AI-related investments and profit-taking after recent gains in South Korean stock prices.

He also noted that inflows into bond funds increased due to bargain hunting as interest rates rose and strong investment demand from private sector investors.

South Korea Expands Funding for Science Research​

Separately, the Ministry of Science and ICT announced a significant expansion of government support for basic science research.

The ministry said it selected 4,628 individual researchers to carry out projects under a government funding programme for the first half of 2026. This represents a 25 percent increase compared with the previous year.

To support these projects, the government will allocate 643 billion won, equivalent to about $435 million, aiming to revive basic research activities that had previously been scaled back.