[MarketING] Korean Stock Market Breeze Ahead of Seollal Holiday... What Is the Price Direction of Low PBR Stocks?

KOSPI and KOSDAQ Rise for Two Consecutive Days
Noroo Paint Hits Upper Limit on News of Secondary Battery Material Launch

On the 8th, ahead of the Lunar New Year holiday, the KOSPI closed higher for the second consecutive day amid a stock-specific market. This was thanks to strong earnings reports from U.S. companies and domestic buying of low PBR (price-to-book ratio) stocks. Foreigners and institutions led the KOSPI, while foreigners led the KOSDAQ, driving the indices upward.

On the 8th, one day before the Lunar New Year holiday, the KOSPI and KOSDAQ started with an increase of more than 10 points. Photo by Huh Younghan younghan@

KOSPI Recovers to 2620 Level... KOSDAQ's Gains Outpace KOSPI

On the previous day, the KOSPI continued its two-day rally, recovering to the 2620 level, supported by simultaneous buying from foreigners and institutions. On the 8th, the KOSPI closed at 2620.32, up 10.74 points from the previous session. Foreigners and institutions, who had been heavy sellers at the start of the year, drove the index. On the previous day in the KOSPI market, foreigners and institutions purchased 411.4 billion KRW and 294.7 billion KRW respectively. Meanwhile, individuals sold alone, offloading 709.7 billion KRW. It appears that individuals were realizing profits ahead of the Lunar New Year holiday.

Most of the large-cap stocks closed higher. SK Hynix (3.48%), LG Energy Solution (2.07%), Hyundai Motor (2.04%), Celltrion (0.34%), POSCO Holdings (0.78%), and Naver (0.73%) rose. Samsung Electronics (-1.20%), Samsung Biologics (-1.33%), and Kia (-1.31%) declined.

Kangwon Land showed a three-day consecutive rise on the back of last year's strong earnings and expectations of benefits from the 'Corporate Value-Up Program.' Hanmi Semiconductor, which announced a plan to retire 20 billion KRW worth of treasury shares, hit the daily price limit on the 8th. Noroo Paint recorded a limit-up after announcing the launch of adhesives and coatings that reduce the risk of secondary battery fires.

By sector, mixed trends appeared. The machinery sector posted the largest gain with a 4.10% increase, followed by insurance (3.53%), finance (1.47%), precision medical instruments (0.81%), and distribution (0.54%) sectors showing strength. Conversely, the textile and apparel (-3.15%), electricity and gas (-1.76%), transportation and warehousing (-1.34%), and telecommunications (-1.11%) sectors closed weaker.

The KOSDAQ also rose for the second day, closing at 826.58, up 14.66 points (1.81%) from the previous session, outperforming the KOSPI in terms of gains. Looking at trading trends by investor type, foreigners were net buyers with 141.7 billion KRW, while individuals and institutions showed net selling of 112 billion KRW and 22.4 billion KRW respectively.

Among the top market cap stocks in the KOSDAQ, eco-friendly battery material stocks EcoPro BM (5.64%) and EcoPro (11.92%) surged sharply for the second consecutive day. Rainbow Robotics, in which Samsung Electronics holds a 14.8% stake, rose more than 11% on the day.

Low PBR Stocks Strong... Foreigners Buy Financial, Insurance, and Automotive Sectors

Stocks benefiting from low PBR continued to show strength on the 8th. Samsung Fire & Marine Insurance, KB Financial Group, and Shinhan Financial Group recorded gains in the 3-10% range. Recently, foreigners have mainly accumulated stocks in the financial, insurance, and automotive sectors, which are noted for low PBR. In fact, from the 2nd to the 7th, foreigners heavily bought Hyundai Motor (1.0987 trillion KRW), Samsung Electronics (634.1 billion KRW), Kia (368.3 billion KRW), Samsung C&T (272.3 billion KRW), KB Financial Group (201.7 billion KRW), and Hana Financial Group (178 billion KRW).

The market is paying close attention to how the index, which has been rising recently thanks to demand concentrated on low PBR stocks, will perform after the Lunar New Year holiday. Since the government has announced it will unveil specific implementation plans for the Corporate Value-Up Program by the end of this month, it is expected to influence the KOSPI until then.

Cho Chang-min, a researcher at Yuanta Securities, said, "The upward trend in low PBR stocks will continue for the time being. However, selective screening among low PBR stocks is necessary, and the differentiation in stock prices among low PBR stocks ultimately comes down to financial soundness."

Roh Dong-gil, a researcher at Shinhan Investment Corp., said, "There were some market concerns that the rise in low PBR sectors might be a short-term theme, but with the influx of foreign investors, the rise in low PBR sectors has resumed. Given that the government's stock market stimulus policy is expected to be detailed in February, and coinciding with the annual dividend season, sectors within finance are expected to be relatively comfortable alternatives from the perspectives of dividend income and low PBR."