Donghak Ants Buying BBIG Stocks in September Correction Market

Top Net Buyer is LG Chem
Bought 604.1 Billion Won This Month
2nd is Naver, 3rd Kakao

"Let's Buy While Taking a Break" Sentiment
Buying BBIG Leading Stocks Amid Price Decline

[Asia Economy Reporter Oh Ju-yeon] Amid the global stock market correction causing slight fluctuations in the domestic market, individual investors are scooping up shares in the BBIG (Bio, Battery, Internet, Game) sectors, which are showing weak stock prices.

According to the Korea Exchange on the 14th, individual investors have been net buyers focusing on BBIG leading stocks in the KOSPI market from the 1st to the 11th of this month. The top net purchase was LG Chem, with purchases amounting to 604.115 billion KRW during this period. LG Chem, regarded as the leader in the secondary battery sector, is expected to continue its performance improvement into the third quarter following the second quarter. An analysis of LG Chem’s third-quarter operating profit estimates from three or more securities firms by financial information provider FnGuide projects 634.3 billion KRW, a 66.8% increase compared to the same period last year. Hana Financial Investment recently reported, "Operating profit in the petrochemical division is expected to approach 600 billion KRW, driving earnings," raising the third-quarter operating profit estimate to 722.7 billion KRW and increasing the target price to 1 million KRW, a 25% rise from the previous target of 800,000 KRW.

Individual investors also placed Naver (NAVER, 331.8 billion KRW) and Kakao (323.7 billion KRW) as the second and third largest net purchases. Naver and Kakao have attracted attention as untact (non-face-to-face) related stocks due to the impact of COVID-19, and are also evaluated to maintain solid growth from a fundamental (corporate performance) perspective. Naver’s third-quarter revenue is expected to reach 1.8992 trillion KRW, with operating profit at 275.2 billion KRW, representing increases of 14.1% and 36.4% respectively compared to the same period last year. Kakao is also expected to exceed 1 trillion KRW in revenue and record 114.6 billion KRW in operating profit in the third quarter, up 29.5% and 94.0% year-on-year, respectively.

Individual investors also focused on Hanwha Solutions, whose stock price surged sharply due to policy momentum such as the Green New Deal, purchasing 239.3 billion KRW worth of shares, ranking sixth in net purchases. This was followed by concentrated buying of Celltrion (7th, 179.5 billion KRW), Samsung SDI (10th, 145.7 billion KRW), and game stocks Netmarble (11th, 125.7 billion KRW) and NCSoft (12th, 83.7 billion KRW).

These BBIG leading stocks have shown clear price weakness since the beginning of this month. LG Chem, whose target price rose to 1 million KRW, saw its stock price fall 4.73% from 740,000 KRW on August 31 to 705,000 KRW as of the closing price on the 11th. Although the KOSPI rose 1.01% to 2,419.88 in the morning session that day compared to the previous trading day, BBIG leading stocks generally declined.

The same applies to Naver and Kakao, ranked second and third in individual net purchases. Naver’s stock price dropped 6.51% from 322,500 KRW on August 31 to 301,500 KRW on the day, while Kakao fell 8.35% from 407,000 KRW to 373,000 KRW. Hanwha Solutions’ stock price, which rose to 52,300 KRW intraday on the 7th from 39,950 KRW, fluctuated afterward and fell to the 45,000 KRW range on the day. Celltrion has been stagnant around 300,000 KRW since the end of last month, while Samsung SDI recorded -5.30% and NCSoft -1.21%.

The reason individual investors are eager to buy BBIG stocks is interpreted as a psychology of "buying while taking a breather." The securities industry also predicts that investment demand for these stocks will continue. Lee Jae-seon, a researcher at Hana Financial Investment, said, "The newly announced BBIG K-New Deal Index by the exchange specifically lists stocks, unlike the past KRX300 index, which is expected to directly and indirectly benefit these sectors," adding, "The combined market capitalization of the top 12 major stocks in the four BBIG K-New Deal sectors increased from 20.3% at the end of June to 21.6%, and the proportion of operating profit in the stock market is also likely to increase from the current consensus level of 3.6% to 6.6% by 2022." Shin Seung-jin, a researcher at Samsung Securities, forecasted, "Leading stocks such as BBIG are likely to rebound after short-term negative factors are resolved."