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S. Korea’s big companies rattled by retail investors’ growing influence

Sep 18, 2020 (Gmt+09:00)

South Korea’s big companies such as Samsung, LG and Hyundai often make shareholder-friendly moves to accommodate institutional investors, who flex their muscles in major corporate decisions. The conglomerates now have one more investor group to please: retail investors.

The country’s retail investors, known as Ants, because of their insignificant individual shareholdings, have become the biggest buying force on local bourses since early this year, betting heavily on a recovery from the coronavirus-driven slump.

Buoyed by a deep retracement since the local market’s yearly low in mid-March and anxious not to miss out on further gains, the Ants have been aggressively buying shares dumped by foreign and domestic institutional investors, providing firm support for the Kospi and the tech-heavy Kosdaq indexes.


Retail investors, known as Ants, have become biggest buying force on local bourses.
Retail investors, known as Ants, have become the biggest buying force on local bourses

According to Samsung Electronics Co.’s half-year business report on Sept. 18, the number of its minority shareholders, who own less than 1% of the electronics giant, surged 156% to 1.45 million at the end of June, from 886,060 at the end of 2019. Market watchers said the Ants snapped up shares as the global tech company’s share price fell to an “attractive” level amid panic selling caused by the pandemic.

The Ants also favored SK Hynix Inc. and LG Display Co., deemed blue-chip shares but trading hands at less than 100,000 won ($86) apiece.

Some local media jokingly dubbed the heavy buying by the swarm of small investors the "Donghak Ants Movement," a reference to the 19th-century "Donghak Peasant Movement," a peasant revolt against rich and foreign invaders.

INTEREST NOT ALWAYS WELCOME

Analysts said retail investors’ strong interest may not always be good news for the companies.

On Thursday, executives at LG Chem Ltd., the country’s largest chemicals maker, hurriedly arranged a conference after announcing a plan to spin off its lucrative battery business as retail investors, angered by LG’s decision, dumped shares for two straight days, wiping billions of won out of its market capitalization.

During the conference call, LG Chem’s Chief Financial Officer Cha Dong-seok said the company would do whatever is needed to maintain shareholder value.

Hyundai Motor Group, as part of its shareholder-friendly policy for retail investors, introduced an e-voting system for its shareholder meetings to allow remote participation.

“When a company had to make a major decision such as a business sell-off or an acquisition of a rival, in the past management mainly addressed institutional investors’ concerns. But with the growing influence of retail investors, management now has one more investor group to worry about,” said a local brokerage analyst.

By Jeong-Soo Hwang and Kyung-Min Kang

hjs@hankyung.com

In-Soo Nam edited this article

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