POSCO Draws Foreign Investors Despite First Ever Deficit

Foreigners Judged as a Low Point, Net Buying of 180 Billion Won This Month... Largest This Year
Possibility of a Second Half Rebound ↑ with Auto Industry Recovery

[Asia Economy Reporter Minwoo Lee] Foreign investors are flocking to POSCO, which recorded its first-ever quarterly loss in the second quarter of this year. They seem to believe that this performance marks the bottom and that a rebound is possible with the recovery of the automotive industry in the future.

According to the Korea Exchange on the 27th, foreign investors have net purchased POSCO shares worth 181.6 billion KRW since the beginning of this month. This is the largest monthly net purchase record this year. Among the top stocks by foreign net purchases this month, only Samsung Electronics (1.05 trillion KRW), 'KODEX 200 (247.5 billion KRW)', and LG Electronics (199.6 billion KRW) are ahead of POSCO.

Since net purchasing 120.8 billion KRW in January, foreign investors have steadily sold POSCO shares. They net sold over 300 billion KRW over three months from February (103 billion KRW), March (113.2 billion KRW), and April (95.4 billion KRW). After gradually reducing their selling pressure, they turned to net buying starting last month. Despite POSCO posting its first-ever quarterly loss and a poor performance report, foreign investors actually increased their holdings. On the 21st, POSCO announced that its consolidated sales for the second quarter of this year were 13.7216 trillion KRW, with an operating profit of 167.7 billion KRW. These figures represent decreases of 15.9% and 84.3%, respectively, compared to the same period last year. Net income also dropped 84.6% to 104.9 billion KRW during the same period. On a separate basis, sales were 5.8848 trillion KRW, and operating loss was 108.5 billion KRW, marking the first-ever quarterly loss.

This decline was due to the global reduction in steel demand caused by the impact of the novel coronavirus disease (COVID-19). Accordingly, crude steel and product production volumes decreased by 1.27 million tons and 870,000 tons respectively compared to the previous quarter, and sales volume fell by 850,000 tons. In particular, orders for automotive steel sheets dropped significantly more than expected, causing cold-rolled sales to fall to 1.8 trillion KRW, well below the expected 2.4 trillion KRW.

The industry views this as the bottom and expects a recovery going forward. The influx of foreign investors is also in this context. From the second half of the year, with the recovery of the upstream market, there is an increased possibility of improvement in both sales prices and costs. Considering the high dividend payout ratio and securing a safety margin, it is judged to be an appropriate time for long-term investment and bottom buying. Hong Seong-woo, a researcher at KB Securities, said, "Attention should be paid to the recovery of the automotive industry," adding, "Although global automobile production in the second quarter decreased by 48% compared to the same period last year, factory operating rates have recovered this month to 75% in Korea, 90% in China, 60% in the United States, and 50% in Europe."

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