Foreign Investors Benefit from Rising Stock Prices, but Caution Urged Due to Anticipated Decline in Returns

Stock prices of net stocks bought by foreigners all rise… Ant returns ‘decline’
Debt investment surges due to policy expectations… “Caution needed due to short-term overheating”

Workers monitor the stock market at Hana Bank headquarters in Myeong-dong, Seoul on the 8th. Photo = Yonhap News

Maeil Ilbo = Reporter Gwangpyo Lee | Low PBR stocks with a low price-to-book ratio (PBR) lead the domestic stock market. Expectations that undervaluation will be resolved once the corporate value up program is introduced have boosted stock prices. However, the joys and sorrows of every investment entity are mixed. The returns for foreign investors who have snapped up low PBR stocks are impressive, but individual investors are crying foul.

According to the Korea Exchange on the 12th, foreign investors made net purchases of 5.4862 trillion won in the securities market from the 25th of last month to the 8th. Foreign interest appears to be increasing after the government announced on the 24th that it would introduce a value-added corporate programme. The Corporate Value Up Program is a measure introduced by the government to solve the ‘Korea Discount’ problem and is planned to be introduced starting next month.

Foreign buying was evident in major stocks. Foreigners made net purchases for 15 consecutive trading days from the 19th of last month to the 8th of last month. It has been about a year and 2 months since September 29 to October 27 (19th), 2022, that a foreigner bought a KOSPI 200 company for more than 15 consecutive days.

Looking at individual stocks, foreign funds grew into low PBR stocks such as Hyundai Motors (KRW 1.2309 trillion), Kia (KRW 539.7 billion), Samsung C&T (KRW 307.3 billion), and KB Financial Group (KRW 278 billion). In particular, Hyundai Motors’ net purchase amount is 21.9% of KOSPI’s total net purchase.

The top 20 net stocks bought by foreigners all rose. Among them, 14 stocks rose so sharply that the increase was in double digits. Samsung Fire & Marine Insurance rose the most, at 40.51%. Hyundai Motors (35.14%) and Samsung C&T (33.3%) also increased. Hanmi Semiconductor (32.6%), Samsung Life Insurance (32.59%), and SK Square (30.14%) also rose more than 30%.

Unlike foreigners, individuals started to realize profits by selling net KRW 6.5926 trillion. In particular, individuals sold 1.4301 trillion won the value of Hyundai Motors, which ranks first in net purchases by foreigners. Most of the top net sellers, including Kia (KRW 618.2 billion), Samsung C&T (KRW 451.5 billion), and KB Financial Group (KRW 327.7 billion), matched the highest net purchases from foreigners.

However, returns on stocks bought by individuals were shabby. Among the top 20 stocks bought, only three stocks rose in price. Only Samsung SDI (8.76%) and LG Energy Solution (3.55%) showed a significant increase, while SK Hynix (0.92%) rose only slightly. On the other hand, NAVER (KRW 298.8 billion), the most bought, fell 5.5%, and the 1 highest net bought stocks, including Samsung Electro-Mechanics (-4.8%), Hyundai Auto Ever (-11.07%) , Hive (-9.91%), and LG Innotek (6.37%), were down 5.5% All fell from fifth place.

Cho Chang-min, a researcher at Yuanta Securities, said, “The upward trend of low PBR stocks will continue for now,” and added, “Among low PBR stocks, stocks with excellent financial strength saw a large increase in their stock. prices.” He added, “Companies with a sound financial structure can pursue shareholder returns once the value-up program is confirmed.”

Meanwhile, ants’ ‘debt’ is also increasing rapidly. According to the Korea Financial Investment Association, the credit balance in the securities market on the 8th was KRW 9.451 trillion, an increase of KRW 717.2 billion (8.2%) compared to the end of last year (KRW 8.7338 trillion). The balance of the margin loan is the amount that the investor has not repaid after borrowing money from a securities company for investing in stock. An increase in this balance means that leveraged investments (loans) have increased.

Among the stocks with the highest market capitalization, credit balances automobiles and financial stocks classified as low PBR stocks, including semiconductor stocks, all increased at once. As of the 8th, Hyundai Motor Company’s credit balance was 145.45 billion won, an increase of 65% compared to the end of last year (88.04 billion won).

Kia’s credit balance was 108.5 billion won, an increase of 121% from the end of last year (49.06 billion won). In addition, the credit balances of financial and holding companies such as KB Financial Group and Shinhan Financial Group also increased by 113% and 178%, respectively, this year. Among semiconductor stocks, Samsung Electronics’ credit balance increased 42% compared to the end of last year, and SK Hynix’s credit balance increased 70%.

Amid widespread expectations of a turnaround in the semiconductor industry, the news that the government is pursuing a corporate value-up program appears to have had an impact on investors’ growing interest in low PBR stocks that are expected to benefit.

In the securities world, advice is given to avoid indiscriminate investment in low PBR themes and to invest after considering the underlying strength of the company. In particular, it is noted that after the specific details of the corporate value-up program have been confirmed, it is necessary to consider the possibility that stocks that have risen so far will be immediately adjusted due to the disappearance of policy materials.

Cho Byeong-hyeon, a researcher at Daol Investment & Securities, suggested, “Recently, low PBR stocks have shown the tendency of the theme stocks, and it is necessary to be careful as they have overheated in a short period of time. It is necessary to do so. invest to consider the company’s fundamentals.”

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