Active foreign buying fuels stock rally
Foreign investors have loaded up on Korean large-cap stocks over the past week, catapulting the benchmark index to the 2,100-point level for the first time in 19 months, data showed Friday.
According to the data by the Korea Exchange, offshore investors were net buyers of local shares for the past six consecutive sessions, with their net purchases reaching 1.12 trillion won ($980 million).
Lotte Shopping, a flagship unit of retail conglomerate Lotte Group, was the most coveted issue with foreign buying coming to 187.8 billion won.
Analysts pointed out that foreigners probably snapped up Lotte Shopping as it was deemed undervalued despite such positives as strong fourth-quarter earnings and a group plan to establish a holding company.
Lotte Shopping finished higher for the past two sessions after going south for three days due to unfavorable leads like China’s threat of retaliation against the planned deployment of an advanced missile defense battery in South Korea.
“Despite sluggish business conditions, Lotte Shopping posted good results for the fourth quarter of last year,” said Sohn Yun-kyung, an analyst at SK Securities. “There was enough room for a rebound as its share prices dropped sharply and expectations for a group holding company were high.”
In October last year, Seoul picked Lotte’s golf course in the southeastern county of Seongju as the site for the missile defense battery. Lotte with high business exposure in China would in exchange receive a plot of military-owned land just east of Seoul.
China has strongly protested the deployment of the system, which comes with a high-powered radar, claiming Washington will use the device to spy on its military development.
Chinese media has recently unleashed a barrage of reports that Korean companies will suffer “severe damage” should it become a reality.
Leading automaker Hyundai Motor was the second most-bought stock by foreign investors with their net buying standing at 91.5 billion won. Top-cap Samsung Electronics. came in third with 84.3 billion won.
Foreign buying also focused on top Internet portal operator and search engine Naver, No. 1 auto parts maker Hyundai Mobis and chemicals maker Lotte Chemical.
Some market watchers predicted offshore investors to continue their net buying down the road, sending the benchmark Korea Composite Stock Price Index (KOSPI) to a higher plateau.
“With U.S. stocks continuing their rallies, risk appetite is striking across the globe,” said Bae Sung-young, an analyst at KB Securities. “There are high expectations for better corporate earnings thanks to improving macroeconomic indicators in both advanced and emerging markets.”
Others, however, said it remains to be seen whether foreign investors will continue their buying mode as there are not many domestic drivers amid lingering external uncertainties.