Foreign Investors Snap Up SK, Hanwha and Doosan Shares
Foreign investors, who have recently continued large-scale net selling in South Korea’s main stock market, are net buyers of general holding company shares.
Foreign investors, who have recently continued large-scale net selling in South Korea’s main stock market, are net buyers of general holding company shares, indicating that funds are still flowing into holding companies with exposure to growth industries even as investors sell broader KOSPI stocks.
According to Yonhap Infomax on May 19, foreign investors posted net sales of 84.93 trillion won, equivalent to about $56.44 billion, in the benchmark stock market from the beginning of this year through the previous trading day. However, they maintained net buying positions in holding company stocks during the same period.
By company, foreign investors recorded net purchases of 609.5 billion won in SK Inc. shares, while also buying 78.5 billion won worth of HD Hyundai shares and 560.5 billion won worth of Doosan Corporation shares. Other holding companies that attracted foreign buying included Hanwha with 358.4 billion won, LG Corporation with 93.9 billion won, CJ Corporation with 144.9 billion won and Hyosung with 18 billion won.
As a result, foreign ownership ratios in major holding companies rose across the board. Foreign ownership in SK climbed to 29.78 percent as of May 15 from 26.95 percent at the end of last year, while HD Hyundai rose to 26.12 percent from 25.52 percent. Doosan increased to 18.89 percent from 14.98 percent, and Hanwha climbed to 21.91 percent from 16.99 percent. LG rose to 36.11 percent from 35.07 percent, CJ increased to 16.70 percent from 14.39 percent and Hyosung advanced to 20.31 percent from 18.95 percent.
The securities industry says foreign capital has been flowing into holding companies because of the growth potential of their business portfolios. Lee Kyung-yeon, an analyst at Daishin Securities, said, “Foreign buying is not simply sector rotation, but rather reflects the business structures and industrial growth potential of each holding company.”
Analysts also say policy expectations are contributing to the trend. Park Gun-young, an analyst at KB Securities, said holding companies have long traded at discounts to net asset value because of conflicts of interest between controlling shareholder families and ordinary shareholders, as well as opaque governance structures. He added that expectations surrounding proposed revisions to the Capital Markets Act are now being reflected in valuations.
Park said future regulatory changes are expected to make it more difficult for controlling shareholders to pursue mergers on terms unfavorable to minority shareholders using undervalued affiliate shares or to pursue duplicate listings, allowing subsidiary value to be reflected more fully in holding company valuations.
The so-called “anti-stock price suppression law” currently under discussion among politicians is also viewed as supporting investment sentiment toward holding companies. Park said, “The rerating trend for holding companies is continuing,” adding that “if related legislation accelerates in the future, discounts to net asset value could narrow further.” He also said investors should focus on holding companies whose consolidated and standalone earnings are improving together on the back of stronger subsidiary performance and expanded shareholder returns.
Yoon Young-sil
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