Foreigners and Institutions Swept Up Chemical and Financial Stocks After Chuseok

[Asia Economy Reporter Ji-hwan Park] Foreign investors and institutional investors have been concentrating their purchases on the chemical and financial sectors in the KOSPI market following the Chuseok holiday. The buying momentum in the chemical sector is interpreted as reflecting high expectations for improved earnings, supported by robust battery demand along with recent rises in oil prices and improvements in refining margins. In the financial sector, it is analyzed that the market is entering a full-fledged interest rate hike phase due to rising U.S. Treasury yields, making it the biggest beneficiary.

According to the Korea Exchange on the 3rd, foreign investors bought the most shares of SK Innovation and LG Chem in the KOSPI from September 23 to October 1, right after the Chuseok holiday. The net purchase amounts were 295.6 billion KRW and 238.6 billion KRW, respectively. During the same period, LG Chem (128.2 billion KRW) and SK Innovation (109.1 billion KRW) also ranked 3rd and 4th among institutional investors' net purchases.

The reason foreign and institutional investors are interested in the chemical sector is that, unlike most industries expected to see earnings slowdowns due to COVID-19 base effects, the expansion of battery demand and improvement in refining margins are expected to continue driving strong performance in the second half of the year. The International Energy Agency (IEA) forecasts that the global electric vehicle fleet will reach at least 145 million units by 2030, about 13 times last year's 11 million units. The explosive demand for electric vehicles is also fueling expectations for rapid growth in the secondary battery market, a key component.

Recent rises in oil prices and improvements in refining margins, which account for a significant portion of sales in the petrochemical sector, are also cited as reasons for the positive outlook. In the third week of last month, refining margins surpassed $6 per barrel. This is the first time since the first week of October 2019, about two years ago, that refining margins have exceeded $6. The industry generally considers the breakeven point for refining margins to be between $4 and $5.

Financial stocks such as KB Financial Group (137.4 billion KRW), Shinhan Financial Group (89.4 billion KRW), and KakaoBank (87.9 billion KRW) ranked 3rd, 5th, and 6th respectively in foreign investors' net purchases. During the same period, institutional investors also focused on financial stocks including BNK Financial Group (31.1 billion KRW), Samsung Fire & Marine Insurance (20.6 billion KRW), and Hyundai Marine & Fire Insurance (26.7 billion KRW). The surge in U.S. Treasury yields since mid-last month is believed to have driven buying in the financial sector, which is a representative beneficiary of rising interest rates. The yield on the U.S. 10-year Treasury note rose from around 1.30% on the 20th of last month (local time) to as high as 1.55% on the 28th, marking the highest level since June.

A financial investment industry official said, "The market now views that we have entered a full-fledged interest rate hike phase," adding, "It appears that investors are buying financial stocks such as banks and insurance companies in anticipation of further rate hikes in the second half of the year."

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