Foreign stock ownership breaks W500tr barrier for first time

Foreign investors held a record high of over 500 trillion won in shares of listed companies in South Korea in January.

Foreign investors owned a total of 501.96 trillion won in shares of South Korea’s listed companies, adding 20.4 trillion won from the previous month or almost 100 trillion from a year earlier, the Financial Supervisory Service said Monday.

They accounted for 32 percent of the total stock ownership, up from 31.2 percent in December.

The prospect of the greenback weakening offers incentives to investment in emerging markets such as South Korea, Lee Jae-hun, an analyst at Mirae Asset Financial Group said in a report on Monday. “They can expect capital gains on exchange rate differences,” Lee said.

Foreign investors began their buying spree in June.

Except for November, foreigners remained net buyers from June to January. In January, overseas investors bought a net 1.78 trillion won worth of stocks.

By nationality, investors with US passports owned 41.1 percent or 206.5 trillion won of the total shares owned by foreign investors. Europeans accounted for 28.4 percent while Asians held 12.8 percent.

Americans and Asians remained net buyers last month while Europeans and Middle Eastern investors were net sellers.

The top three stocks, which saw a largest amount of net buying, were steelmaker Posco, with a total net buying of 346.5 billion won, and automaker Hyundai Motor Co., with 171.8 billion won.

The foreign buying continued despite corporate Korea continuing to offer lower dividends than other advanced and emerging markets.

South Korea’s projected dividend yield rate -- the ratio of dividends per share to the current share price -- is 1.88 percent this year, according to Kim Seh-chan, an analyst at Dashin Securities, citing data from Thomson Reuters I/B/E/S.

This means that if an investor buys 1 million won worth of Korean stocks, the person can expect to earn 18,800 won in dividends for the year. In 2016, the figure was 1.70 percent according to the data.

The average projected dividend yield rate of 24 advanced and emerging markets is 3.23 percent this year, up from 3.02 percent last year.

South Korea ranked 22nd among 24 countries surveyed by Reuters. Russia topped the chart with a projected dividend yield of 4.93 percent and Taiwan came second with a 4.15 percent.

“Amid growing uncertainty under the (Donald) Trump administration, investors seek investment opportunities in companies with good prospects,” Kim told The Korea Herald.

“Despite weak dividends, anticipation for IT companies such as semiconductor makers and display companies, which are expected to see an improvement this year, seems to be attracting foreign investors.”

Foreigners also were also net investors of bonds last month, with net buying of 1.6 trillion, for the first time since July.

Overseas investors held 90.9 trillion won at the end of January, accounting for 5.7 percent of the total bonds in the country.
 
By Park Ga-young (gypark@heraldcorp.com)