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Analysts focus on shifting sands in bullish Kospi

South Korea’s main bourse index continued its relentless record run Friday, closing at 2,414.63 points, up 0.21 percent from the previous day’s close at 2,409.49.

Making the historic jump past the 2,400 closing mark Thursday, the benchmark Korea Composite Stock Market Index has risen 18.9 percent from Jan. 2 to Thursday, the highest in seven years, according to data by the market operator, the Korea Exchange.

Analysts, meanwhile, focused on the shifting sands amid the bull run, with foreign investors, the driving force of the rally, turning their attention from tech giants and chipmakers in Korea despite their gains in stock market.

The nation’s largest tech firm Samsung Electronics fell 0.16 percent, ending four-day winning streak, while Naver earned 1.08 percent. Chipmaker SK hynix rose 0.71 percent.

Kospi-listed IT firms and semiconductor makers, in fact, saw their highest net sales by foreign investors, according to Ko Seung-hee of Mirae Asset Daewoo in Friday note. 

In July, foreign net sales of Samsung Electronics ordinary shares was 138.5 billion won, while seeing 6.18 percent rise, according to data by market tracker Koscom. SK hynix saw the third-largest foreigners’ net sales, at 93.8 billion won, while its shares rose 5.49 percent. LG Electronics was tallied No. 4 in net sales.

“Foreigners are rather focusing on asset valuations than earnings,” Ko wrote, citing the price-to-book ratio of local semiconductor firms at 1.39 and IT sectors at 1.53. A share’s price-to-book ratio over 1 means the share is overvalued.

Kospi-listed stocks of shipbuilders, banks, insurers and steelmakers, on the other hand are undervalued, Ko said, with price-to-book ratios of below 1, while showing the highest net purchase by foreign investors.

The nation’s largest banking group, KB Financial Group, enjoyed the highest foreign net purchase of 882.8 billion won in July, according to Koscom. The top steelmaker Posco and top insurer Samsung Life Insurance was ranked No. 2 and No. 3 in offshore net purchase, respectively.

With regard to the impact of US Federal Reserve Char Janet Yellen on the market, another analyst said it was premature to consider the remarks to be dovish.

Yellen’s testimony to US Congress on Wednesday had hinted at slower interest rate hikes. Coupled with the central Bank of Korea’s upward revision of growth forecast Thursday, the local stock indexes were given an upward push this week.

But this does not mean that fear of tightening has disappeared, wrote Park Jeong-woo, an economist at Korea Investment & Securities.

“It is certain that the conditions for ‘gradual rate hike’ of central banks are prone to change, as soon as they see noticeable price inflation,” Park wrote Friday. “Now that the moment of inflation is drawing near with an upbeat economy, the sudden transition by central banks appears to be dealing a severe blow to the markets.”

By Son Ji-hyoung (