Biotech stocks, foreigners’ top pick in Korea amid panic selling

Foreigners and institutional investors in the South Korean stock market picked biotechs as their favorite shares in hopes of a biopharma stock jump amid last week's market plunge followed by the negative outlook on the US economy. 

Foreign investors picked Samsung Biologics Co. stocks the most, net buying 99.3 billion won ($72.7 million) of the contract drugmaker's shares from Aug. 5 to 9, data from the Korea Exchange (KRX) showed on Saturday.

The top stock pick by Institutional investors was biotech Celltrion Inc., with 98.5 billion won worth of net buying over the same period.

A majority of biopharma stocks are growth shares, which trade at a discount on their expected future earnings. Such stocks could be very sensitive to rate fluctuations that affect both the discount rate and financing costs.

“Biopharmaceutical stocks may move upward when momentum for rate cuts grows,” said Park Seung-jin, an analyst at Seoul-based Hana Securities Co.

“There is strong demand for obesity and Alzheimer’s disease treatments and some biopharmaceutical firms combine their technologies with artificial intelligence to explore new markets,” Park added.

Second most-favored after Samsung Biologics was KTG Corp.: foreigners net bought 80.7 billion won worth of the tobacco maker's stocks last week.

Foreign investors also net bought 44.1 billion won worth of the country’s No. 1 mobile carrier SK Telecom Co. and 33.6 billion won worth of steel giant POSCO Holdings Inc. over the same period.

Institutional investors’ second- and third-favorite stocks were wind turbine tower maker CS Wind Corp. and game developer Shift Up Corp. They net bought 57 billion won and 43.4 billion won worth of each stock, respectively.

RETAIL INVESTORS EYEING CHIPS

Semiconductor makers were among individual investors’ favorite stocks. Retail investors net bought 2.54 trillion won worth of leading memory chipmaker Samsung Electronics Co. shares, making it their top pick over the five trading days of last week.

Samsung’s crosstown rival SK Hynix Inc. ranked fourth among individual investors’ picks. Retail investors net bought 85.3 billion won worth of its shares over the same period.

Retail investors also net purchased 224.5 billion won worth of cosmetics powerhouse Amorepacific Corp., 103.1 billion worth of internet giant Naver Corp. and 89.9 billion won worth of automaker Kia Corp. last week.

The current share price of Samsung Electronics is 1.1 times and 9.1 times the price-to-book ratio (PBR) and price-to-earnings ratio (PER), respectively, of next year’s earnings estimate. This is according to an Aug. 8 report by Seoul-based KB Securities Co. research head Kim Dong-won, who added that it is a good time to buy the tech giant’s shares.

Some analysts have warned that investor sentiment could be weakened by woes over a chip oversupply.

“If Nvidia Corp., which has met its consumption needs with SK Hynix’s supply, decides to purchase Samsung Electronics’ fifth-generation high-bandwidth memory chips HBM3E, it may lead to intensifying competition in the sector and an oversupply of the memory interface,” said Song Myung-sup, a researcher at Hi Investment & Securities Co. in a report last month.

Korean retail investors also bet on global semiconductor stocks last week.

Between Aug. 5 and 9, domestic individual investors’ favorite exchange-traded fund (ETF) was the Direxion Daily Semiconductor Bull and Bear 3X Shares, which tracks the daily investment results of the New York Stock Exchange Semiconductor Index’s performance.

Other favored global ETFs of local investors include Proshares Ultrapro QQQ ETF, which seeks daily investment results of the Nasdaq-100 Index performance, Graniteshares 2x Long NVDA Daily ETF, which tracks the results of daily changes in Nvidia common shares, and the Direxion Daily TSLA Bull 2X Shares, which seeks the results of the daily performance of Tesla Inc. common shares.

Write to Jung-dong Roh at dong2@hankyung.com
Jihyun Kim edited this article.