Foreigners Selling Bombs, But Which Stocks Did They Still Buy?

Samsung Electro-Mechanics steady purchase of 45.8 billion KRW, LG U+ 32.9 billion KRW
Continuous performance improvement impact

[Asia Economy Reporter Song Hwajeong] As the novel coronavirus infection (COVID-19) continues to spread, foreign investors' selling pressure is also intensifying. While foreigners continue to 'sell,' they are maintaining buying momentum in certain stocks such as Samsung Electro-Mechanics and LG Uplus.

According to the Korea Exchange on the 28th, foreigners have sold a total of 3.0855 trillion KRW in the domestic stock market since the beginning of this week. They sold 2.8303 trillion KRW in the KOSPI market and 255.2 billion KRW in the KOSDAQ market. In particular, on the 26th, foreigners sold 876.1 billion KRW in the KOSPI market, marking the largest daily net selling volume in 6 years and 8 months since June 13, 2013 (955.1 billion KRW).

Despite this strong selling pressure, foreigners continue to buy certain stocks consistently. The stock most purchased by foreigners this week was Samsung Electro-Mechanics, with a net purchase of 45.8 billion KRW. Hanjin KAL followed with 37.6 billion KRW, then LG Uplus (32.9 billion KRW), Kakao (22.0 billion KRW), Samsung C&T (17.2 billion KRW), Hyundai Elevator (14.7 billion KRW), Iljin Materials (11.8 billion KRW), NHN Korea Cyber Payment (11.1 billion KRW), NCSoft (9.4 billion KRW), and Helixmith (8.2 billion KRW) ranked within the top 10 foreign net purchases.

Foreigners have shown buying momentum in Samsung Electro-Mechanics on all days except four this month. In February alone, foreigners net purchased 187.8 billion KRW of Samsung Electro-Mechanics. This is interpreted as continuous performance improvements leading to the inflow of foreign buying. Kwon Seongryul, a researcher at DB Financial Investment, said, "Although the first quarter of this year has many variables, Samsung Electro-Mechanics' operating profit increased by more than 10% compared to the previous quarter, and it is expected to rise continuously until the third quarter. Among the three IT giants of Samsung Group?Samsung Electronics, Samsung SDI, and Samsung Electro-Mechanics?two stocks have already hit new highs, so it is time for Samsung Electro-Mechanics to catch up with the two leading stocks."

LG Uplus, which foreigners have continued to net buy for 20 consecutive days, also appears to benefit from expectations of improved performance. LG Uplus recorded an operating profit of 185.1 billion KRW in the fourth quarter of last year, a 77.8% increase compared to the same period last year. Choi Gwansoon, a researcher at SK Securities, explained, "Through efficient cost execution, LG Uplus delivered operating profits exceeding market expectations. Despite being the third-largest operator, it recorded the highest operating profit among the three major telecom companies in the fourth quarter." Choi added, "With the expected improvement in wireless segment profitability due to the increase in 5G subscribers this year and the economies of scale in the paid broadcasting segment following the acquisition of LG HelloVision, operating profit is expected to recover to around 800 billion KRW."

Additionally, foreigners continue to buy NHN Korea Cyber Payment (9 days), Iljin Materials (8 days), and Samsung C&T (8 days).

It is expected that it will take time for foreigners to return. Roh Donggil, a researcher at NH Investment & Securities, said, "From the perspective of foreign investors, they cannot help but be concerned about the increasing number of confirmed domestic cases. Two key factors for a meaningful rebound in the stock market are passing the peak of the increase in confirmed cases in Korea and confirmation of a dovish stance by the U.S. Federal Reserve (Fed). It will take more time to confirm these two factors."

While selling pressure continues in the spot market, signs of a directional shift are gradually appearing in the futures market. Ha Inhwan, a researcher at Meritz Securities, said, "Foreigners have started to turn upward after entering an oversold phase in the futures market, and the spot market is approaching an oversold phase. Considering the possibility of an additional 500 billion to 1 trillion KRW of selling in the spot market, since foreign demand is in an oversold state, the timing for switching to net buying is approaching," he explained.

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