Institutions and Foreigners Earning More Than Individuals, What Did They Hold in Volatile Market? "Focus on Rotation"

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[Asia Economy Reporter Lee Seon-ae] The investment performance ranking for January is institutions > foreigners > individuals. It is no exaggeration to say that individual investors supported the stock market throughout January while enduring the dual selling pressure from institutions and foreigners. Nevertheless, it is presumed that individuals lagged behind in investment returns (based on the top 10 stocks). Although the domestic stock market rebounded after a short-term correction, volatility is expected to continue, and investment advice increasingly emphasizes focusing on sectors with rotation to generate profits.

According to the Korea Exchange on the 3rd, the top stock by net purchases by institutions in January was SK, with an estimated return of 5.9%. Following were Korea Zinc, Big Hit, POSCO Chemical, EcoPro, Iljin Materials, LG Innotek, Hanwha Aerospace, CJ CheilJedang, and SKC. The average estimated return of these 10 stocks was 2.5%.

The top two stocks by net purchases by foreigners in January were Naver and Kakao, with estimated returns of 7.2% and 3%, respectively. Next were LG Chem, NCSoft, SK Telecom, Hana Financial Group, Shinhan Financial Group, SK Chemicals, Doosan Fuel Cell, and KB Financial Group. The average estimated return of these 10 stocks was -2.5%, which is better than the individuals’ performance (-5.9%). Individuals mainly bought stable large-cap stocks such as Samsung Electronics, Samsung Electronics Preferred, Hyundai Mobis, and Hyundai Motor, but they gave back a significant portion of the early-year gains by the end of January, resulting in poor investment performance for the month.

After overcoming a four-trading-day decline and successfully rebounding in February, foreigners net purchased stocks in the following order on the 1st and 2nd: Celltrion, LG Chem, HL Biopharma, Netmarble, Samsung SDI, Celltrion Healthcare, POSCO, SK Chemicals, NCSoft, Hana Financial Group, Samsung Biologics, and Kakao Games. Institutions net purchased SK Hynix, Samsung Electronics, Celltrion, Naver, LG Electronics, Kia Motors, SK Innovation, Samsung Biologics, Celltrion Healthcare, POSCO International, Hyundai Mobis, and OCI in that order.

Looking at the baskets of stocks held by institutions and foreigners, they still focus on large-cap stocks but show more diversity in sectors and stocks such as finance, gaming, and healthcare compared to individuals. This is interpreted as paying attention to a rotation market. The rotation ratio has been rising since August. A high rotation ratio means that sector rotation continues rather than steady rises in specific sectors.

Kang Song-cheol, a researcher at Shinhan Financial Investment, said, "In February, rather than following the sectors that rose in January, it is effective to select sectors where momentum can emerge from a rotation perspective." He added, "From a rotation perspective, sectors where the trading volume share in January did not increase significantly compared to December 2020 and where the earnings consensus change rate is favorable are expected to be positive." The sectors mentioned include healthcare, shipbuilding, banking, steel, construction, machinery, IT hardware, chemicals, and semiconductors.

Additionally, since the KOSPI is forming a box range, securities firms advise actively utilizing opportunities to buy leading stocks at low prices. The KOSPI index has risen continuously for three months since November last year but is currently forming a box range between 2950 and 3200. The leading sectors in this year’s stock market are considered to be automobiles, chemicals, and electronics (semiconductors). The 12-month expected net profit estimates for these sectors have been revised upward by 20% compared to early October 2020. Jung Myung-jin, head of the investment information team at Samsung Securities, emphasized, "During market corrections, it is an opportunity to buy leading stocks such as automobiles, chemicals, and electronics at low prices."

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