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Foreign investors pick up undervalued Korean stocks

Collected: 2017.02.21

Distributed: 2017.02.24

Source: Go Direct

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Foreign investors picked out undervalued stocks while shopping for Korean equities so far into the year, according to a FnGuide study commissioned by the Maeil Business Newspaper on Monday.

Top seven buys by foreign investors include shares of POSCO, Lotte Shopping Co., LG Electronics Inc., Hyundai Steel Co., Hana Financial Group and KB Financial Group and each stock’s price-to-book ratio (PBR) stands below 1, showed the study that looked into top 100 picks by offshore investors in the Seoul’s main bourse Kospi from January 1 to February 17.

Offshore investors’ total net buying of the seven stocks reached 1.62 trillion won ($1.42 billion), nearly equivalent to the combined stock value of top four companies they have net sold during the cited period. PBR of the four companies - Samsung Electronics Co., SK Hynix Inc., Korea Aerospace Industries Ltd. and Hankook Tire Co. - exceeded 1, according to the study.

PBR that compares a company’s market value to book value is often used by stock investors to identify low-priced stocks with great returns. PBR below 1 suggests that a company is undervalued compared to its peers or vice versa.

The study found that the number of Kospi-listed firms that foreign investors net purchased more than 100 billion won worth of stocks was 11 including the top seven picks. Among them, shares of the six firms that have also seen their return-on-equity (ROE) gain two straight years since 2015 have grown 12.6 percent so far into this year, four times faster than the Kospi that has risen mere 2.7 percent.

By Moon Il-ho

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