Benefiting from the improvement in U.S. manufacturing order indicators, foreign capital inflow into the South Korean stock market reached a new high since August in a single day

Zhitong Finance learned that South Korea's benchmark stock index attracted the largest foreign capital inflow in more than three months, as strong economic data from the United States suggests growth for this export-oriented country. On Tuesday, global funds net purchased 539.6 billion won (USD 385 million) of Kospi index constituent stocks, the highest level since August 16, which pushed the index up 1.9% after two consecutive days of decline.

Seo Sang-young, a strategist at Mirae Asset Securities Co., stated that investors were encouraged by the improvement in the U.S. ISM manufacturing new orders index. The new orders index rebounded to 50.4% after contracting for seven consecutive months, up 3.3 percentage points from October's 47.1%. This indicator is a measure of South Korea's exports and has entered the expansion zone for the first time in eight months.

Nevertheless, the outlook for the South Korean economy still faces risks from Trump's tariff policies. The Bank of Korea unexpectedly cut interest rates for the second consecutive time last week. Analysts pointed out that this could be a preemptive response to the growing trade and economic concerns following Trump's election as president. Meanwhile, South Korea's CPI growth was below expectations and has been below the Bank of Korea's target for the third consecutive month, showing signs of price stabilization.

In this context, the Bank of Korea has lowered its economic growth forecast for 2025 to below 2%, which may have contributed to this unexpected move. The Bank of Korea currently expects the economy to grow by 1.9% next year, down from the 2.1% forecast in August.

Lee Seung-Suk, a researcher at the Korea Economic Research Institute, stated after the rate cut: "You should view this as a preemptive response to the inevitable decline in investment and consumption. If Trump targets U.S. trade partners like China and South Korea next year, the economy will inevitably decline. The Bank of Korea also considered the increasing debt burden on households and businesses. So this rate cut was unexpected, but it doesn't necessarily mean a preemptive cut."

This decision contradicts the Bank of Korea's consistent stance of not cutting rates consecutively unless there is an economic crisis. This move highlights the urgency among council members and indicates that the Bank of Korea intends to become more flexible if there are more fluctuations in the global economy.

Trump's campaign promises included imposing higher tariffs on trade partners and potentially reducing subsidies for foreign companies operating in the U.S., such as South Korea's Samsung Electronics and Hyundai Motor.

South Korea heavily relies on exports to maintain its economic growth momentum. Ahn Yea-ha, an analyst at Kiwoom Securities, stated: "The uncertainty regarding semiconductor exports is rising. Factors such as tariffs on China following Trump's election may exacerbate the risks of a downturn in the South Korean economy."