Expectations of an increase in the corporate value of domestic listed companies are attracting foreign capital to the South Korean stock market. Particularly, there is a concentrated buying interest in automotive stocks, including Hyundai Motor, and growth stocks in industries such as artificial intelligence (AI) and semiconductors.
According to the Korea Exchange on Feb. 5, foreigners showed a buying dominance of 178.9 billion won (US$133.91 million) in the KOSPI market on the same day. They have been on a streak of net buying for the fourth consecutive trading day since Jan. 31.
Foreign investors have demonstrated a robust net buying trend in the KOSPI market, amounting to a substantial 6.4 trillion won over the past month. Within the first three trading days of this month alone, an accumulative total of 3.16 trillion won has been recorded.
While individual investors, who have played a leading role in the domestic stock market, show hesitancy in the lower-priced buying zone, there is an evaluation that foreign capital is underpinning the market.
Experts are quick to analyze the background of the foreign net buying trend. Firstly, there is a noticeable increase in South Korean exports since January. The manufacturing indicators in the United States, which failed to rebound last year, are now showing figures approaching the expansion zone.
From the exchange rate perspective, foreign investors have also consistently maintained a buying stance when the dollar-won exchange rate exceeds 1,300 won. Yang Hae-jung, an analyst at DS Investment & Securities, noted, “Although the strengthening of the won is not as rapid as before, at the current level, the buying position remains superior to selling.”
Market participants believe that the expectations surrounding the government’s “Corporate Value-Up Program” have influenced foreign net buying. In the case of large-cap stocks, the low valuation has presented a favorable opportunity for foreign investors, leading to a buying trend centered around large-cap stocks.
Yoon Hyuk-jin, an analyst at SK Securities, stated, “The sharp increase in the stock prices of Hyundai Motor and Kia Motors was made possible due to the positive shareholder return policies and expectations surrounding the Corporate Value-up Program. This was facilitated by the appeal of a low Price-to-Book Ratio [PBR], highlighting the companies’ financial attractiveness.”
The surge in low PBR-related stocks fueled by expectations of increased corporate value might be premature and some argue that an interest rate cut is essential for a substantial influx of foreign investment to take place.