Foreign investors were net buyers of South Korean stocks in July, reversing their selling spree for the last six months over recession worries and looking to step in and buy on the cheap amid signs of a market bottom.

According to the Korea Exchange on Sunday, foreigners purchased net 2.3 trillion won ($1.7 billion) worth of shares on the benchmark Kospi, the highest monthly volume since a 3.3 trillion-won inflow in December last year. The main board rose to 2,451.50 Friday, up 5.1 percent from 2,332.64 on the last trading session in June. 

The jump was 12th-largest among 20 major economies, with Argentina topping the list at 38.52 percent, followed by Australia at 9.45 percent, the US at 9.11 percent, France at 8.87 percent and India at 8.54 percent in the same period.

Chip giants Samsung Electronics and SK hynix, battery makers LG Energy Solution and Samsung SDI and carmaker Hyundai Motor were the five companies whose shares overseas investors had bought the most. Samsung Electronics shares worth 546.1 billion won were sold -- the largest volume among the five.

Analysts warned that the July stock bounce could be a bear market rally, referring to projections by local brokerages, which said the Kospi would see short-lived gains and stay between 2,500 and 2,600 in August.

“Despite inflation and recession worries, US stocks extended their summer rebound. Soaring prices and steep rate hikes are not news anymore,” said Kim Hyoung-ryoul, head of research at Kyobo Securities. Kyobo expects the Kospi to rise to 2,650 -- the highest projection among six securities firms betting on a bear market rally.

A price slowdown and government fiscal support to prevent a downturn would all help back the rally, Kim added.

“But a slowing US economy is something we should take into consideration,” said Seo Sang-young, an analyst at Mirae Asset Securities. “A weakening won does not bode well for foreign investors here.”

The US Commerce Department said last Thursday that the economy contracted for a second quarter straight, a day after the Federal Reserve raised interest rates by 75 basis points for the second time since June to bring down inflation.

US Treasury Secretary Janet Yellen said declining economic output in the last two quarters did not necessarily mean a recession was taking place in the world’s largest economy, which she said still maintains strength, especially in jobs.

Two weeks ago, Yellen discussed with the Korean finance minister injecting liquidity into currency markets if needed, in her first trip here since she took office last year. Four days before her visit, the won tumbled to a 13-year low against the US dollar, as investors scrambled to secure the safe-haven asset amid growing volatility.