Foreign investors scoop up software stocks on upbeat Q2 earnings outlook

[THE INVESTOR] As investors went into risk-aversion mode, software firms are increasingly becoming their safe havens due to low price volatility and analysts’ optimistic forecasts on their earnings.

According to market analysis provider FnGuide, foreign investors scooped up 600.5 billion won (US$521 million) worth of local software shares since May this year.

Leading the pack was Naver, South Korea’s No.1 Internet portal, with 425.3 billion won, followed by Com2uS at 112.5 billion won, Samsung SDS at 90.8 billion won, Gamevil at 25.2 billion won, Duzon Bizon at 23.7 billion won and POSCO ICT 25.2 billion won. 

 

“Operating profit forecasts for software sector stocks in the second quarter are increasingly getting higher,” said Lee Kyung-min, an analyst at Daishin Securities.

He said that global investors are showing high interest in the sector as software stocks are leading the second-quarter earnings season in the US.

Foreigners were net buyers of Korean software stocks for 21 of the 27 trading days since June 1.

Buoyed by foreign investors’ aggressive buying activities, the price of these stocks has surged in recent months.

Naver rose 11.5 percent to end at 754,000 won as of July 11 from 677,000 won in April 29. During the same period, POSCO ICT gained 7.5 percent to 6,170 won from 5,740 won.

The growing popularity of software stocks is partly due to analysts’ sanguine outlook for their second quarter earnings.

The average operating profit forecast for the April-June period for the software sector by brokerage houses was 666.1 billion won as of the end of June, up 7.1 percent from 622 billion won in March, according to securities information.

By Park Han-na (hnpark@heraldcorp.com)