Foreign demand for chip stocks powers Kospi to 1-year high

South Korea’s main bourse Kospi on Tuesday hit its highest closing since June last year, boosted by foreigners’ net buying in semiconductors and electric & electronic shares.

The Kospi rose 1.04% to close at 2585.52 on May 30, its highest point since reaching 2595.87 on June 10, 2022. Foreigners net bought 672.9 billion won ($509 million) worth of stocks on the day, while local individual and institutional investors net sold 542.7 billion won and 112.4 billion won worth of shares, respectively.

Korean semiconductor shares surged thanks to forecasted growing demand for generative artificial intelligence. Nasdaq-listed Nvidia Corp. shares have soared more than 25% since May 24 as the US chip designer on the day reported better-than-expected first-quarter fiscal 2024 results and released a strong outlook for the second quarter.

Samsung Electronics Co. and SK Hynix Inc., the world’s two largest chipmakers, led the Kospi's rise on Tuesday.

Samsung stock increased 2.84% to 72,300 won, hitting a 52-week-high. It was the first time that its closing price has recovered to the 72,000 won range since March 2022. Foreigners net bought about 440 billion won worth of Samsung shares on Tuesday.

SK Hynix stock rose 1.01% to finish at 110,300 won on the same day, close to its 52 week-high of 110,500 won. Some 162 billion won worth of shares were net purchased by foreigners.

“Korean chip shares soared with the closing of the US debt-ceiling deal, which would suspend the debt limit through January 1 of 2025, and Nvidia is garnering attention with its new products based on AI,” said Kim Seok-hwan, an analyst at Mirae Asset Securities Co. 

“Samsung Electronics shares benefitted from a positive outlook that its chip output cut will improve the company’s operating profit in the second half of this year,” Klim added.

LG Electronics Inc. also spiked 10.83% to finish at 124,900 won on Tuesday.
 
The company’s price-to-book ratio (PBR) is 0.97 times, which has not fully reflected the value of its vehicle component businesses, said Hana Securities Co. analyst Kim Rok-ho in a report on May 30.

“Investors need to pay attention to LG Magna e-Powertrain Co., a joint venture between LG and the world’s leading car parts maker Magna International Inc. As the JV supplies to US auto giants including General Motors Co., it has growth potential amid the expansion of the US electric vehicle market,” he added.

“The JV, specialized in making batteries for EVs, will increase LG Electronics’ revenue from 2025 in earnest. LG’s vehicle component business should be valued at 9.9 trillion won at the time, doubling 4.9 trillion won, the valuation based on the current target price,” he stated.

Write to Eui-Myung Park at uimyung@hankyung.com

Jihyun Kim edited this article.