Q1 Investment Report Shows Foreigners' Returns Dominated by Semiconductors and Value-Up Stocks

Foreigners' Top 10 Net Purchased Stocks in Q1 Achieve Average Return of 22.62%
High Returns Driven by Net Buying Focused on Semiconductors and Low PBR Stocks
Foreign Buying Momentum Expected to Gradually Slow in Q2

This year, foreigners have shown record-breaking net buying in the domestic stock market, along with excellent returns. In the first quarter, they mainly net bought semiconductor stocks and low price-to-book ratio (PBR) stocks, achieving returns that outperformed other buying entities.

According to the Korea Exchange on the 4th, foreigners net bought 16.3025 trillion KRW in the domestic stock market in the first quarter, with the top 10 net bought stocks all recording favorable returns. Foreigners net bought Samsung Electronics the most in the first quarter, followed by Hyundai Motor, SK Hynix, Samsung C&T, Samsung Electronics Preferred, KB Financial, Samsung Biologics, Hanwha Aerospace, Kia, and Samsung Life Insurance. As a result of net buying mainly semiconductor and low PBR stocks, 7 out of the 10 stocks recorded double-digit returns, except for 3 stocks. Hanwha Aerospace rose by as much as 64.26% in the first quarter, and Samsung Life Insurance (33.57%), SK Hynix (29.33%), KB Financial (28.47%), and Samsung C&T (22.39%) all increased by more than 20%. The average return of the top 10 net bought stocks by foreigners reached 22.62%.

Junho Byun, a researcher at IBK Investment & Securities, analyzed, "With expectations of interest rate cuts by the U.S. Federal Reserve (Fed) and assumptions of a soft landing for the U.S. economy, the global stock market has shown a strong trend, and foreign buying has continued for five months since November last year." He added, "Domestically, the short-selling ban policy implemented in early November last year and the corporate value-up program at the end of January this year have acted as policy momentum, further strengthening foreign buying."

Foreigners are particularly focusing their purchases on semiconductors, especially Samsung Electronics. In the first quarter, foreigners net bought about 5.5 trillion KRW worth of Samsung Electronics shares. They bought 2.3 trillion KRW in January, decreased to 231.7 billion KRW in February, and then increased again to 2.9707 trillion KRW in March. Samsung Electronics accounted for nearly one-third of the total foreign net buying in the first quarter. Youngwon Lee, a researcher at Heungkuk Securities, analyzed, "Since the beginning of the year, foreign buying has been led by the IT sector, especially semiconductors, and beneficiary stocks influenced by the value-up program. The scale of Samsung Electronics purchases nearly reached 3 trillion KRW in March, further strengthening semiconductor buying intensity."

While foreigners achieved double-digit returns in the first quarter, institutions and individuals recorded relatively poor returns. Institutions bought LG Chem the most in the first quarter, followed by Shinhan Financial Group, Korea Electric Power Corporation, EcoPro BM, Hyundai Motor, Hana Financial Group, EcoPro Materials, Kakao, LG, and Samsung SDI among the top net bought stocks. Institutions also recorded high returns by buying related stocks amid expectations for the value-up program, but the poor performance of secondary battery-related stocks dragged down returns. Low PBR stocks such as Shinhan Financial Group (14.57%), Hyundai Motor (14.50%), and Hana Financial Group (32.95%) recorded double-digit returns, whereas secondary battery-related stocks like LG Chem (-12.02%), EcoPro BM (-4.86%), and EcoPro Materials (-30.61%) underperformed. The average return of the top 10 net bought stocks by institutions was only 3.15%.

Individuals, who also bought many secondary battery-related stocks in the first quarter, recorded the lowest returns among buying entities. Nine out of the top 10 net bought stocks by individuals posted negative returns. Individuals net bought NAVER the most in the first quarter, followed by Samsung SDI, Enchem, JYP Ent., LG Chem, POSCO Holdings, SK Innovation, APR, Hanwha Solutions, and Orion. The average return of the top 10 net bought stocks by individuals was 2.42%, which was only spared from negative returns thanks to Enchem, the only stock that rose. Enchem surged 185.53% in the first quarter.

As attention focuses on whether the record-breaking foreign buying momentum seen in the first quarter will continue, forecasts suggest it will gradually slow down in the second quarter. Researcher Junho Byun said, "The momentum of foreign buying is likely to slow down after the second quarter," adding, "The Fed's base rate cut could materialize in the second quarter, raising the possibility of sell-on-high (sell-on-peak), and since the short-selling ban policy is only until the second quarter this year, some of the funds that flowed in due to the short-selling ban are likely to realize profits before the end of the second quarter."