Following the announcement of the government’s introduction of a program to enhance corporate value, stocks with a low price-to-book ratio (PBR) showed strength. Over the past two weeks, foreign investors’ net purchases on the KOSPI surpassed 5 trillion won. While low PBR stocks surged due to foreign buying, individual investors unloaded these stocks, leading to a contrasting trend.
According to data from the Korea Exchange’s Information Data System on Feb. 12, foreign investors’ net purchases of domestic stocks in the KOSPI market totaled 5.7 trillion won (US$4.3 billion) from Jan. 29 to Feb. 8. This period marked the emergence of low PBR stocks as significant leaders in the South Korean stock market. Compared to the preceding two weeks between Jan. 15 to 26, where foreign investors’ net purchases on the KOSPI stood at 369.4 billion won, this represents a staggering 14-fold increase.
Over the past two weeks, foreign buying interest has been concentrated on low PBR stocks such as Hyundai Motor at 1.24 trillion won, Kia at 501.6 billion won, Samsung C&T at 451.4 billion won, and KB Financial Group at 258.8 billion won. Foreign net purchases of Hyundai Motor accounted for 24.4 percent of the total net purchases in the KOSPI by foreigners. Most of the top foreign net buying stocks saw increases, with several experiencing significant surges. For instance, Samsung Fire & Marine Insurance rose by 34.54 percent over the two-week period, comparing its closing price of 247,500 won on Jan. 19 to 333,000 won on the 8th of this month. Similarly, Hyundai Motor increased by 27.81 percent during the same period, rising from 195,600 won to 250,000 won.
On the other hand, individual investors embarked on profit-taking, selling a net total of 6.16 trillion won worth of stocks over the same period, in contrast to foreign investors. The top stocks in terms of individual net selling mostly matched those favored by foreign investors for buying. Particularly, individuals sold Hyundai Motor, the top choice for foreign net buying, worth 1.72 trillion won. Following Hyundai Motor, they also sold Kia for 531.2 billion won, Samsung C&T for 444.3 billion won, and KB Financial Group for 293.5 billion won. However, the stocks that individuals purchased did not perform well in terms of returns. Naver, which recorded the highest net buying by individuals during this period, with purchases totaling 297.5 billion won, declined by 2.83 percent from 212,000 won to 206,000 won. Samsung Electro-Mechanics, the second-highest in terms of individual net buying at 85.6 billion won, also decreased by 3.0 percent from 143,100 won to 138,800 won.
Cho Chang-min, an analyst at Yuanta Securities, said, “Aggressive net buying of low PBR stocks by foreign investors has been observed. The upward trend of low PBR stocks is likely to continue for the time being.” He also advised, “The difference between the rising and falling prices among low PBR stocks reflects their financial soundness,” suggesting the need for careful selection among low PBR stocks.