Foreign investors big on banks

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Foreign investors big on banks

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Foreign investors net purchased 9.71 trillion won ($9.1 billion) in Korean stocks last year, pushing up their ownership to the highest in 11 years. The most popular asset was KB Financial Group, with investors anticipating big returns from higher interest rates.

The Korea Exchange reported Monday that foreign investors bought 6.58 trillion won worth of stocks on the main Kospi index and 3.13 trillion won on the Kosdaq. For the junior bourse, it was the largest net purchase made by foreign investors in a year.

As a result, foreign investors now own 37.2 percent of stocks traded on the Kospi, up from 35.2 percent in 2016. On the Kosdaq, foreign investors own 13.3 percent, up from 10.1 percent the previous year.

The industry that saw the most purchases by foreigners was the financial industry, with 5.16 trillion won, followed by the service industry with nearly 3 trillion won and chemicals with 1.68 trillion won.

More traditional industries saw the most offloading. In electronics, foreign investors sold 7.53 trillion won in stock. Manufacturing lost 2.46 trillion won and construction 3.17 trillion won.

The increased investment in financial stocks coincides with rising expectations of further interest rate hikes in response to tightening in the United States. Higher rates could translate to a bigger profit at banks since borrowers will have to pay more interest.

The Bank of Korea has already begun raising its key rate, bringing it from 1.25 percent to 1.5 percent in November. It was the first hike in six and a half years.

By company, KB Financial Group topped the list, with foreign investors net buying 1.55 trillion won worth of stocks, followed by LG Electronics with 1.44 trillion won and LG Chem with 1.24 trillion won.

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KB Financial Group shares saw its value rise 48.1 percent in 2017. LG Electronics’ share was up 105.4 percent and LG Chem up 55.2 percent.

On the selling side, foreign investors offloaded Samsung Electronics shares the most, selling 6.13 trillion won followed by preferred shares of the same company worth 1.73 trillion won. The company experienced record profit last year on the back of high demand for its semiconductors.

SK Hynix, another semiconductor maker, ranked third with 1.57 trillion won worth of shares sold. The offloading in semiconductor shares was based largely on the projection that the market reached its peak last year, and demand will likely taper off this year.

Despite foreign investors selling Samsung Electronics shares, the company’s value went up 41.4 percent, with preferred shares up 45.85 percent. SK Hynix’s value rose 71.14 percent, in line with the bullish market last year.

On the Kosdaq, biopharmaceutical shares were popular. Celltrion, the biggest company on the bourse by market cap, ranked No. 1 among foreign investors, who purchased 809.1 billion won in the company’s stock, followed by another biopharmaceutical company, SillaJen, with 362.6 billion won.

The Korea Exchange projected that foreign investors will continue buying Kosdaq stocks this year.

“In the case of the Kosdaq, which saw the biggest net purchases [by foreign investors], the current momentum will likely continue thanks to government policies further boosting the Kosdaq,” an official at the Korea Exchange said, “such as easing regulations and more active investment by the state pension fund,” the index’s largest institutional investor.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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