Finally, Are Foreigners Returning...? Growing Expectations for Samsung Electronics Driven by Institutions and Foreign Investors Together

Foreigners and Institutions Drive KOSPI Recovery to 1980 Level After Two Months
Samsung Electronics Purchases Highest for Two Consecutive Days
COVID-19 Case Increase and Earnings Downgrade Pace Slow Down... Growing Expectations for Foreign Investor Return

[Asia Economy Reporter Song Hwajeong] Foreign investors have finally started buying again in the KOSPI market, leading the KOSPI to recover the 1980 level together with institutional investors. Along with the KOSPI, Samsung Electronics also saw net purchases for two consecutive days, raising expectations for the return of foreign investors.

According to the Korea Exchange on the 20th, foreign investors and institutions net bought 335.7 billion KRW and 841.5 billion KRW respectively in the KOSPI on the previous day. Foreign investors turned to net buying in the KOSPI for the first time in seven trading days, and net purchases exceeding 300 billion KRW occurred for the first time in about a month since March 17. Thanks to the combined buying power of foreign investors and institutions, the KOSPI closed above the 1980 level for the first time in over two months since March 6.

The joint buying by foreign investors and institutions also led Samsung Electronics to recover the 50,000 KRW mark. Both foreign investors and institutions were the largest net buyers of Samsung Electronics for two consecutive days. Foreign investors net bought 143.5 billion KRW and institutions net bought 348.8 billion KRW of Samsung Electronics over two days. Samsung Electronics, which had shown a sluggish trend during the rebound market since the end of March, reached the 50,000 KRW level for the first time this month.

As foreign investors stepped in, both the KOSPI and Samsung Electronics, which had been moving sideways, recovered the 1980 and 50,000 KRW levels respectively, increasing expectations for the return of foreign investors. Since the outbreak of the novel coronavirus disease (COVID-19), foreign investors have maintained a selling trend in the domestic stock market. Foreign investors began selling actively from mid-February, briefly switched to buying for 12 weeks at the end of April, but returned to selling after just one week. From February to April, foreign investors sold about 20 trillion KRW in the KOSPI. They also sold 3 trillion KRW this month.

However, on the 15th, the number of shares outstanding of the iShares MSCI Emerging Markets ETF, a representative ETF investing in emerging markets, increased for the first time since the beginning of the year, raising expectations for changes in foreign investors’ supply and demand. Hainhwan, a researcher at Meritz Securities, explained, "The Korean weighting in the iShares MSCI E.M ETF, which tracks emerging market stocks, is 11.6% (Samsung Electronics 3.63%). The inflow of funds into this ETF could signal that passive funds might finally flow in." He added, "The increase in shares outstanding is partly due to the slowdown in the rise of COVID-19 cases in emerging countries such as Russia, India, and Brazil, which is one of the conditions for the return of foreign investors." Conditions for the return of foreign investors include a weakening of the US dollar, upward revisions of earnings estimates, and a slowdown in the increase of COVID-19 cases in emerging markets. Recently, the pace of downward earnings revisions has also slowed. The researcher said, "It is necessary to confirm whether the slowdown in downward revisions is temporary. Since the dollar index still exceeds 100 points, a weakening of the dollar is needed for foreign funds to gain directional momentum."

There are still many variables regarding the trend reversal to net buying by foreign investors. Laborngil, a researcher at NH Investment & Securities, pointed out, "Foreign investors responded with net buying in the domestic market during the remdesivir clinical trial results, but it lasted only one to two days." He added, "There are many variables to confirm for a trend reversal to net buying by foreign investors, such as US-China tensions, global economic recovery, and stabilization of emerging market currencies."

Samsung Electronics, which had underperformed until now, is considered to have sufficiently attractive valuation. Since the KOSPI hit its bottom on March 19, Samsung Electronics’ stock price has underperformed the KOSPI return by 18.8 percentage points. Choi Doyeon, a researcher at Shinhan Financial Investment, analyzed, "The stock prices of Samsung Electronics and the semiconductor sector remain at the level of the fourth quarter of last year," adding, "This reflects the expectation that DRAM prices will not rise in the second half of this year due to COVID-19, making it an attractive valuation to approach."

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