Financial stocks rise on back of rate cut expectations, Value-up program momentum

A screen in KB Kookmin Bank's trading room in western Seoul shows the Kospi closing at 2,722.67 points on Friday, up 1.23 percent, or 33.17 points, from the previous trading session. [YONHAP]

Korea's financial stocks advanced on Friday, driven by foreign investors’ renewed expectations for interest rate cuts this year and the Value-up program.

The latest uptrend followed the European Central Bank's 25-basis-point interest rate cut, the first reduction in the Eurozone since 2019.

Shinhan Financial Group rose 3.4 percent from the previous trading day in the main Kospi bourse to close at 47,100 won ($34.46) on Friday. Its share price advanced by up to 5.82 percent mid-trading.

KB Financial Group also gained 2.84 percent to close at 79,600 won. Hana Financial Group rose 3.69 percent mid-trading before closing at 60,400 won, up 1.17 percent, and Woori Financial Group rose 1.42 percent to 14,280 won.

“Capital from investors who are buying at low prices is flowing into financial stocks, which have been trading weak in the market as of late as investors took profit,” noted Lee Jae-won, analyst at Shinhan Securities.

According to the Korea Exchange, foreign investors netted 345 billion won on Friday, while institutions netted 249.3 billion won and retail investors shed 608.9 billion won.

Foreign investors net bought shares worth 3.7 billion won in Hana Financial Group on Friday, 6.4 billion won in Shinhan Financial Group and 8.4 billion won in KB Financial Group.

Rekindled expectations for rate cuts partly drove the latest buying spree by foreign investors, as the European Central Bank decided to cut key interest rates by 0.25 percentage points and the U.S. economy began to show signs of cooling. The won-dollar exchange rate dropped sharply, down 7.7 won to 1,365.3 won against the dollar on Friday.

Interest rate reductions from central banks will lead to increased liquidity in the market, which is expected to add momentum to the Value-up program. Financial stocks are key beneficiaries of the Korean government’s Corporate Value-up program, which aims to tackle the chronic undervaluation of domestic stocks due to their comparatively low price-to-book ratios.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]