Foreigners' Massive Sell-Off, Yet Stocks They Still Bought Are...

Sold 1.2765 Trillion KRW Last Week
Focused Buying on Hyundai Motor, LG Household & Health Care, Samsung Biologics, and Other Stocks with Strong Earnings

[Asia Economy Reporter Song Hwajeong] Due to the contraction of investment sentiment caused by the novel coronavirus infection (Wuhan pneumonia), foreign investors sold more than 1 trillion won in the domestic stock market last week, but it was found that they net bought stocks with improved earnings, including Hyundai Motor.

According to the Korea Exchange on the 3rd, foreign investors net sold about 1.2765 trillion won in the domestic stock market last week. They sold 1.1341 trillion won in the KOSPI market and 142.3 billion won in the KOSDAQ market. Foreign investors, who led the rise of the domestic stock market with strong buying at the beginning of the year, turned to safe assets after the novel coronavirus outbreak and continued to sell for two consecutive weeks in the domestic stock market.

The stock that foreign investors, who net sold in the domestic stock market, bought the most last week was Hyundai Motor. Foreign investors net bought Hyundai Motor by 53.8 billion won last week. Following that, they heavily bought LG Household & Health Care (53.1 billion won) and Samsung Biologics (40.9 billion won). All of these stocks posted favorable earnings in the fourth quarter of last year.

Hyundai Motor recorded sales of 27.868 trillion won and operating profit of 1.2435 trillion won in the fourth quarter of last year. These figures represent increases of 10.5% and 148.2%, respectively, compared to the same period last year. Net profit turned positive, recording 851.2 billion won. Jinwoo Kim, a researcher at Korea Investment & Securities, said, "The fourth-quarter earnings last year were a surprise earnings (earning surprise) due to favorable exchange rates, improved product mix, and cost reduction," adding, "Considering the 200 billion won in labor-related costs reflected as a one-time expense, the consensus beat margin expands up to 34%."

Researcher Kim added, "In the first quarter of this year, the good performance will continue with the added effect of the Genesis GV80," and "The stock price, which had fallen due to supply and demand factors, quickly normalized with the announcement of good earnings, and there is still sufficient room for further rise."

LG Household & Health Care recorded sales of 2.0133 trillion won, up 18.5%, and operating profit of 241 billion won, up 14.3%, in the fourth quarter of last year. Hyoju Son, a researcher at Hanwha Investment & Securities, said, "It recorded solid earnings that met market expectations," adding, "Luxury brand sales grew by 20.4% amid steady growth in cosmetics," and analyzed, "Although the slowdown in duty-free sales is regrettable, the expanded growth potential in the Chinese local market is positive."

Although negative impacts are inevitable due to the spread of the novel coronavirus, the prevailing view is that earnings will recover from the first quarter low. Researcher Son explained, "Due to the spread of the novel coronavirus, earnings at duty-free shops and in the Chinese local market may be hit in the short term," adding, "Considering the past Severe Acute Respiratory Syndrome (SARS) outbreak, the impact is expected to last about 2 to 4 months, but earnings will recover from the first quarter low."

Samsung Biologics also recorded an earnings surprise in the fourth quarter of last year. Samsung Biologics achieved sales of 313.3 billion won and operating profit of 106.9 billion won in the fourth quarter of last year. Gahye Hong, a researcher at Daishin Securities, analyzed, "Both sales and operating profit significantly exceeded consensus," adding, "Sales increased due to a focus on producing high-priced products and improved factory utilization, and operating profit greatly improved due to increased sales and changes in product mix."

As volatility expands due to the novel coronavirus, the strength of stocks with improved earnings is expected to become more pronounced. Yaeun Kim, a researcher at IBK Investment & Securities, said, "Although volatility will appear in the short term, stocks supported by earnings tend to have relatively low volatility, and since earnings improvement will appear in the future, stock prices will strongly gain upward momentum when external risks ease."

Foreign investors are expected to actively buy again when risks ease. Researcher Kim said, "Although selling pressure was released due to investment sentiment contraction caused by unexpected external risks, it is more appropriate to see it as some profit-taking rather than a complete shift to selling," adding, "With major central banks continuing accommodative monetary policies, liquidity-driven markets are expected to continue for the time being, and abundant liquidity will focus on sectors based on earnings improvement."

This content was produced with the assistance of AI translation services.