Overseas investors pull $771 million from stocks

International money managers are losing patience with Korea’s biggest companies after a 17th straight quarter of disappointing earnings.

Overseas investors have pulled a net $771 million from the nation’s stocks this year, the only outflows among six Asian emerging markets tracked by Bloomberg, after withdrawals of almost $2 billion in December. Seventy-four percent of Kospi index companies that reported fourth-quarter results so far have trailed analyst estimates, versus 57 percent for the MSCI Emerging Markets Index.

Kia Motors and Naver were among the most sold stocks as lower-than-estimated earnings added to concern that a stronger won is weighing on Asia’s fourth-largest economy. The Bank of Korea cut its 2015 growth forecast last month, while Franklin Templeton Investments says global money managers are finding more attractive stocks in India and Taiwan.

“Foreign investors seem to be tired of earnings repeatedly disappointing,” Oh Sung-sik, the chief investment officer for Korean equities at Franklin Templeton Investments in Seoul, which oversees about $4.9 billion, said. “Although prices are cheap, there’s no growth momentum, which makes people reluctant to pour money into such a market.”

Naver, which runs the Line messaging service, recorded $302 million of outflows this year while Kia Motors, the nation’s second-biggest automaker, had $160 million. Samsung Electronics, the nation’s biggest company, had the biggest withdrawals at $847 million. While the company’s fourth-quarter earnings beat estimates, it lost market share to Apple in smartphones.

Korea’s economy expanded last quarter at the slowest pace in more than two years. Exports fell 0.4 percent in January, while a Jan. 30 survey showed a drop in confidence among manufacturers. The BOK cut its estimate for economic growth to 3.4 percent from 3.9 percent on Jan. 15.

The won has gained 11 percent against the yen in the past 12 months, weighing on Korean automobile and electronics manufacturers that compete against Japanese counterparts in offshore markets.

“Corporate earnings seem to be deteriorating,” Kim Young-il, the head of equity at Korea Investment Management, which oversees equivalent of $30 billion. “Given how sensitive Korea is to external economic conditions, investors may struggle to maintain confidence in the nation’s stocks.”

Foreigners may be lured back to Korean shares by low valuations and the prospect of higher dividends, said Nam Dong-woo, the chief investment officer for equities at Eastspring Asset Management Korea, which oversees about $11 billion.

The Kospi is valued at about the same level as its net assets, a 32 percent discount to the MSCI Asia Pacific Index. The Korean measure has advanced 1.3 percent in the past 12 months, trailing the 5.9 percent advance by the MSCI gauge.

Korea is poised for the fastest dividend growth in Asia after Samsung Electronics boosted its payout and the government urged businesses to make better use of their cash hoards. Payouts are set to rise 65 percent during the next 12 months, according to projections.

While dividends are climbing, they’re still lower than peers. The Kospi index has a projected yield of 1.6 percent, versus 3 percent for the MSCI emerging markets index.

“The rising payout ratio is definitely positive, but if you look at countries like Taiwan, it still remains above Korea,” Son Hwie-won, a strategist at Samsung Securities, said.

Bloomberg