Foreign Investors Dump China-sensitive Shares, Target Samsung Elec In THAAD-weighing Market

Foreign investors have turned to safe bluechip Samsung Electronics amid concerns about the ramifications from China’s economic retaliation over deployment of U.S. missile system Terminal High Altitude Area Defense (THAAD).

They will likely to keep to the bellwether technology stock due to apprehension about Korean stocks amid concerns for political and social upheaval following the impeachment verdict on President Park Geun-hye and another rate hike delivery from the U.S. Federal Reserve meeting next week on top of trade challenges.

They have gone decisively long and selectively on Samsung Electronics after Beijing heightened economic retaliation this month after deployment became irreversible.

Data showed Samsung Electronics was most favored by foreign investors among the top 100 stocks in terms of market cap on the main bourse KOSPI in the first seven days of this month. Their net buying of Samsung Electronics reached 435.8 billion won ($377 million). It represents a whopping 47.3 percent of total net buying of large stocks by foreign investors in the same period. March 2 marked the second largest ever amount of net buying for Samsung Electronics shares by foreign investors which was worth 320.8 billion won. The top peak was 325.7 billion won tallied at Aug. 9, 2012. They had net sold 351.1 billion won worth in the technology behemoth and 670.7 billion won in January and February, respectively.

Instead they dumped THAAD or China-sensitive stocks. Net selling of 10 large Korean stocks highly exposed to the Chinese market, including Amore Pacific, LG Household & Healthcare, Lotte Shopping, E-Mart, Hyundai Department Store, Korean Air, GKL, LG Display and Lotte Chemical, came to 150.8 billion won in the past five sessions. These stocks fell 5.9 percent on average in the period, whereas Samsung Electronics gained 4.6 percent.. As of 1:30 p.m. in Seoul trading Thursday, Samsung Electronics shares were flat at 2,010,000 won.

“Samsung Electronics shares fell a little late last month, giving a chance to foreign investors to buy in and the rising tensions over the THAAD issue this month are prompting them to sell THAAD-sensitive stocks and instead to buy Samsung Electronics,” said Lee Jong-woo, head of IBK Investment’s research center. “This transaction pattern could continue if the issue remains unresolved.”

Another factor behind their concentration on the stock is a perception that Samsung Electronics is still relatively cheap although its stock price is hovering at record-high levels of over 2 million won in recent rallies. The semiconductor company`s consensus earnings per share forecast fell from 11.4 times at the end of December to 9.5 times based on this year’s estimated earnings, suggesting the stock remains undervalued against major U.S. rivals like Apple (15.6 times) and Intel (12.7 times).

“Once the uncertainty over THAAD clears, the Seoul market could go on a bull run,” said Yoon Ji-ho, senior executive at EBEST Investment & Securities.