Offshore investors’ total ownership in South Korea’s Mando Corp. has significantly increased over the last four months as the car parts maker became a recent favorite among foreign investors upon improvement in its financial strength and greater leeway for dividends.

Foreign holding in Mando represented 31.3 percent of the company’s entire stake as of last Friday, up 13.36 percentage points from 17.94 percent four months ago.

Of 85 trading days between March 8 and July 8, foreign investors kept net buying spree in Mando stocks for 79 sessions, sending the stock price 53.9 percent to 218,500 won ($190) on July 8 from 142,000 won on March 8. Its shares climbed 5.5 percent to 230,500 won on Monday.

Market analysts noted that foreign buying spree is largely driven by improvement in Mando’s cash flow. The company’s net inflow from financing activities reached 2.5 trillion won in 2014 and 71.1 billion won in 2015. But market analysts expect the company’s cash flow from financial activities is estimated at 53.6 billion won in net outflow this year.

Net inflow from financing activities means that capital raised through loans or stock issuance is larger than payouts, while net outflow means that a company could make dividend payments to shareholders or repay debts, which stockholders will generally welcome. When dividend payout or debt repayment increases, net outflow from financing activities rises.

“Foreign investors prefer shares of companies that buy back their shares or increase dividend payments,” said Lee Jae-man, an analyst of Hana Financial Investment Co. “Mando is expected to enhance shareholder-friendly activities this year” now that it is nearly done with capital investment.

Foreign investors have also recently shifted their interest to car parts companies from finished vehicle companies amid growing uncertainties in the global economy due to the U.K.’s vote to exit the European Union (EU).

“With the growing uncertainties over the global economy amid Brexit jitters, investors worry that finished car companies would face murky outlook,” said Lim Kyung-geun, an official of Credit Suisse. “In contrast, they still think auto parts companies with technical expertise have high growth potential so they have been selling shares of finished car companies while increasing their stakes in car parts companies.”

By Yong Hwan-jin

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