Why foreigners buying Korean stocks in 2019

Foreign investors have been rushing to buy Samsung Electronics, SK hynix and other stocks since the beginning of the year as global funds shift to emerging markets on the easing of U.S.-China trade tensions and other favorable conditions. Stock prices have yet to rise above certain levels predicted by brokerages due to mounting fears about the country’s sluggish economy, but foreigners are coming back on the belief that the recent slowdown has been fully reflected on the bourse, and shares will take off soon.
According to the Korea Exchange (KRX), Sunday, foreign investors bought 2.9 trillion won ($2.58 billion) worth of shares between Jan. 1 and 25, the highest “monthly” figure since October 2017 when they spent 2.97 trillion won. The investment inflow started shortly after the benchmark KOSPI plunged below the 2,000 point level in October. U.S. investors began buying shares of promising but underrated firms from November. Their return has since been attributed to the steady growth in stock prices. Americans account for the highest proportion of foreign investors in the stock market. Global investment giant Barclays said it was operating 58,950 investment accounts in the iShares MSCI South Korea Index Fund, an exchange traded fund (ETF) for the local stock market, Nov. 2. The figure has since grown 31.21 percent to 77,350 accounts as of Jan. 25. The number of accounts in its Mexico ETF grew only 16.44 percent over the same period. The figures for Taiwan and Japan ETFs were down 0.28 percent and 5.07 percent, respectively.

The Barclays ETF is often considered to be a barometer for American asset management firms’ investment into foreign stocks. Market analysts say the share prices of the Korea’s listed firms are currently too low. “Fear dominated the market in the second half of last year. Such a concern has been eased now. The situation is relatively better for emerging economies,” said SK Securities analyst Ha In-hwan. “Money is especially coming to underrated stock markets, and Korea’s is one of the most underrated at the moment.” Some analysts, however, say the current rally could be temporary. “Korea’s stock market is not dominated by firms’ performance but by sentiment. And fears are still present,” said a major securities firm analyst requesting anonymity. “Share prices of Samsung Electronics were down even though the chipmaker posted record high earnings multiple times last year. External variables such as the ongoing trade dispute between the U.S. and China are still there. Now, we see the U.S. government shutdown as an emerging negative factor. Foreigners’ return is a good signal, but I don’t think it will be easy to rise above current levels anytime soon.”

By Jhoo Dong-chan

(Korea Times)