Foreign investors on buying spree for 10 straight days

Foreign investors continued their buying spree for 10 consecutive trading days on Tuesday for South Korea’s main bourse, despite strong US dollars amid US interest rate hikes.

Foreigners bought a net of 99.7 billion won ($83 million) in shares Tuesday, marking the 10th day of net buying, although the benchmark Korea Composite Stock Price Index closed down 0.18 percent, or 3.66 points, to 2,045.12 points as institutional investors dumped a net 248 billion won.

As of Tuesday, foreigners held a record high of 469 trillion won in Kospi shares, according to bourses operator Korea Exchange, accounting for 35.52 percent of total Kospi investors. They had held as much as 44 percent on April 26, 2004.

A strong dollar tends to increase the risks of foreign exchange losses on assets nominated in Korean currency, making Korean stock markets less attractive. But despite the trend of the strengthening dollar against the Korean won, foreign investors remained net buyers for 10 straight days.

“Concerns for strengthening dollars and further weakening of Chinese yuan have been tamed after the foreign exchange reserve was announced last week,” said Kim Yoon-seo, a senior economist at KTB Investment & Securities. “Inflow of foreign investments might continue for the time being.” At the same time, some funds are making a U-turn to stock markets, as bond yields increase after interest rate hikes in the US.

“The value of Korean stocks is relatively underestimated compared to other major markets, which have risen faster than the Korean stock markets,” Lee Yong-gon, a researcher at Hana Financial Investment, said. “There are abundant funds as global funds are moving to stocks from bonds.”

Among stocks foreigners collected were Samsung Electronics and cosmetic companies.

Shares in Samsung Electronics hit a new record high Tuesday for a second consecutive day, closing at 1,862,000 won per share and inching up 0.05 percent, after the top mobile maker announced a better-than-expected earning guidance of the fourth quarter operating profit, which surged nearly 50 percent on-year to 9.2 trillion won.

On the day Samsung made the announcement of a surprise operating profit, the net buying of its shares by foreigners was 45.6 billion won and 64.6 billion won on the next trading day.

Foreigners collected shares in cosmetics companies such as Amorepacific and LG Household & Health Care, whose shares have fallen victim to a political row between South Korea and China since mid last year, when South Korea made the decision to deploy the US’ Terminal High Altitude Area Defense anti-missile system.

By Park Ga-young (gypark@heraldcorp.com)