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Market cap of foreign-owned stocks tops W511tr

The combined market capitalization of South Korean stocks held by foreigners has exceeded 511 trillion won ($445 billion), hitting an all-time high, data showed Tuesday.

Foreigners have purchased a net 4.22 trillion won worth of shares here this year alone, helping drive up the benchmark index KOSPI to 2,117.59 points Monday, according to the Korea Exchange.

The KOSPI and KOSDAQ boards at the South Korean stock market in a photo provided by Yonhap News TV (Yonhap)
The KOSPI and KOSDAQ boards at the South Korean stock market in a photo provided by Yonhap News TV (Yonhap)

The total market cap swelled to 1,369.7 trillion won.

Foreign investors' buying spree on the Seoul bourse has lasted for nearly a year.

In particular, they scooped up a net 2.3 trillion won worth of stocks in the eight trading days so far in March, despite Beijing ratcheting up economic pressure on Seoul over the deployment of an advanced US missile defense system here.

Market watchers attributed it to expectations of a global economic recovery and a perception that South Korea's stock market is undervalued.

"For foreign investors, South Korean stocks have an advantage of being relatively undervalued," said Kim Sung-hwan, a Bookook Securities analyst. "The local stock market is expected to show a trend of being synchronized with the US stock market."

In fact, the average forward price-earnings ratio of South Korean equities stood at 9.5, lower than the 16.6 of the MSCI's developed markets index and the 12.6 of the MSCI's emerging markets index, according to the brokerage firm.

Adding to such an upbeat mood is eased political uncertainty and growing hopes for reform measures following the Constitutional Court's decision last week to uphold the impeachment of Park Geun-hye.

It has "important potential implications for the South Korean economy and market," according to Mark Mobius, executive chairman of the Templeton Emerging Markets Group at Franklin Templeton Investments based in New York.

He raised the possibility of momentum in efforts to reform the nation's family-controlled conglomerates, known as chaebols.

"Since the major chaebols are so important within the South Korean stock market, moves to reform the system could have major implications for the market," he said in a statement. "A weakening of the chaebol system could give an opportunity for smaller companies to grow and prosper without being dependent on the chaebols... There is a feeling that Korea is moving in the right direction."

It will be interesting to see how the country's presidential election plays out in two months, particularly in regards to chaebol reform, which is an opposition-party focal point, he added.

Analysts here also point out the fundamentals of Asia's fourth-biggest economy.

"Domestic companies recorded their biggest earnings ever last year, and there is an analysis predicting a better performance this year," said Oh On-soo, a researcher at Hyundai Securities. "If foreigners' buying mode continues, the KOSPI will be able to move out of a tight range."

Meanwhile, POSCO, LG Electronics and Hyundai Motor were among the local firms most favored by foreign investors this year.

They also shifted to a buying position for Samsung Electronics in March, scooping up a net 600 billion won worth of shares as of Monday. (Yonhap)