Funds from West to emerging Asia power S.Korean stocks

Foreigners reported a record purchase of South Korean shares despite a global economic slowdown, as money moved from the US and Europe into emerging Asia.

Offshore investors bought a net 242.4 billion won ($184 million) on Korea’s main stock market on Monday, raising their purchases to 11.3 trillion won so far this year,. That marks the largest inflow in such a period in history, Korea Exchange data showed, helping the Kospi log a 14.3% gain over the period.

Such demand came as growing risk in the US commercial property sector and a crisis in the European banking industry pressed global investors to pull money out of those markets and seek assets in emerging Asia.

Equity funds in the US and Europe suffered a total outflow of $68.8 billion last week while such funds in emerging Asia enjoyed an inflow of $33.1 billion, according to financial information provider EFPR Global.

Seoul shares also benefited from expectations that the Korean won, the worst performer among emerging Asian currencies so far this year, may rebound as the US Federal Reserve appears likely to end its rate hike campaign.

The global semiconductor industry is also predicted to recover in the second half, improving local stock market sentiment. The country is home to the world’s two largest memory chipmakers — Samsung Electronics Co. and SK Hynix Inc.

That sector is likely to rebound on the back of growth in the global artificial intelligence industry.

LOVE FOR CHIPMAKERS

Foreign investors have bought a net 9.5 trillion won in Samsung shares so far this year and 392.5 billion won in SK Hynix. Purchases of the two microchip stocks made up almost 90% of total stock inflows, although their combined market capitalization accounts for about a quarter of the Kospi’s total.

Such demand helped Samsung and SK Hynix shares advance 23.9% and 30.9%, respectively.

This comes as Samsung announced a cut in chip production last month, fueling hopes for an earlier-than-expected industry recovery.

“In the past, Samsung Electronics’ massive semiconductor output cut resulted in rebounds in both the sector and the Korean economy,” said Kang Hyundam, a fund manager at Timefolio Asset Management in Seoul. “Foreigners made investments in advance based on such experiences.”

Hopes for a microchip industry recovery raised share prices of foreign companies. Micron Technology Inc. surged more than 36% in the US and Tokyo Electron Ltd. jumped over 41%.

The revival in the global semiconductor sector is expected to help Korea’s exports, which were on course to decline for the eighth consecutive month over sluggish overseas chip sales. Asia’s fourth-largest economy has suffered a nearly $30 billion trade deficit so far this year, more than 60% of its total shortfall of 2022.

A rebound in exports may help lift the overall economy and the ailing won currency, which would provide overseas investors with foreign exchange gains.

ENTERTAINMENT NAMES

Shares in major entertainment stocks also ranked among foreigners’ favorites.

JYP Entertainment Corp., YG Entertainment Inc. and SM Entertainment Co. topped the shopping list among overseas investors in the junior Kosdaq, with inflows of 352.7 billion won, 143.2 billion won and 141.1 billion won, respectively.

JYP’s shares nearly have doubled so far this year on the growing popularity of Stray Kids, ITZY and Twice, while stocks of YG, the K-pop label behind global sensation BlackPink, hit a record high on hopes for a new group of seven girls.

“Requests for visits by foreign investment banks have increased significantly this year,” said a JYP official said.

Write to Man-Su Choe at bebop@hankyung.com
 
Jongwoo Cheon edited this article.