Obis Buys Stake in Korea Financial Group After 2 Years... Buy While It's Cheap?

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[Asia Economy Reporter Junho Hwang] Overseas hedge funds have started accumulating shares in Korea Financial Group. Attention is focused on the share accumulation by foreign investors amid a situation where securing performance in the securities industry is difficult due to credit crunch and economic recession.

According to the Financial Supervisory Service on the 17th, ‘Orbis Investment Management Limited,’ based in Bermuda, a tax haven, purchased 0.03% (16,409 shares) of Korea Financial Group, becoming a major shareholder with 5.02% ownership.

Orbis’s shareholding ratio is not considered significant enough to influence management control. Korea Financial Group Chairman Kim Nam-gu holds 20.70% of the shares, and Korea Investment Financial Group Co., Ltd. holds 5.36%. Korea Financial Group stated, "Orbis has held shares for investment purposes since 2012," and "It is understood that the shares were purchased for simple investment purposes."

However, given the recent difficult situation in the securities industry, this share acquisition is seen as unusual. The industry is continuously lowering the target price for Korea Financial Group. Yoon Woo-dong, a researcher at NH Investment & Securities, said, "As of the second quarter this year, Korea Investment & Securities’ debt guarantees amount to 5.8 trillion KRW, with a debt guarantee ratio to capital of 94%, the highest among large securities firms," adding, "Most of the total revenue comes from real estate operations, so there is a high possibility of risk recognition due to rising financing costs in the future." He lowered Korea Financial Group’s target price to 65,000 KRW per share and downgraded the investment opinion to ‘neutral.’

Park Hye-jin, a researcher at Daishin Securities, also stated, "In the case of securities, more than half of the non-performing assets have been written off (liquid assets of 32 trillion KRW as of the end of June), and savings banks are steadily accumulating provisions." However, she analyzed, "Liquidity is sufficient, but the large scale of assets should be taken into consideration."

Korea Financial Group’s stock price declined from 121,000 KRW per share on April 26 last year to 48,150 KRW on October 17. However, since the financial authorities announced liquidity support measures on the 23rd of last month, the price has risen to 56,800 KRW per share as of the 16th.

Meanwhile, Orbis stated on its website about its investment strategy, "We invest in areas that are unpopular or not attracting funds to pursue returns higher than the benchmark."

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