Foreign Investors Holding Samsung Electronics and SK Hynix: Where Next? Seven Sectors Already in Focus

[Financial News] Expectations of a weaker dollar are growing, and that is fueling forecasts that foreign investors will continue to buy net shares in the domestic stock market.
16th According to the securities industry, the Institute for Supply Management (ISM) manufacturing index in the United States came in at 55.6 in July, extending the pace of economic expansion. At the same time, core inflation fell to 2.5% from a year earlier, declining for a second straight month and signaling both improving growth and easing price pressures.
Brokerages said this trend is likely to pressure the dollar lower and work in favor of foreign demand for Korean stocks. Since 2015, when the United States 2-Year Treasury Yield fell and the gap between short- and long-term rates widened, the DXY has dropped by an average of 1.1% per month, with a decline occurring 80% of the time.
Related fund flows are also improving. The iShares MSCI South Korea ETF (EWY) shifted from a net outflow of $2.7 billion in May to a net inflow of $700 million in June, then surged to $5.6 billion in July. So far in August, another $300 million has flowed in net.
If foreign investors return to Korean stocks, Samsung Electronics is seen as the top candidate. Foreign ownership in Samsung Electronics stood at 46.8% as of the 14th, remaining near its lowest level since 2010. Its valuation discount has also become excessive. With foreign holdings already so low, analysts say stronger buying could help drive an index rebound.
However, some analysts say Samsung Electronics should no longer be viewed only as a high-growth leader. That is because investors may increasingly judge the company by shareholder returns rather than growth alone.
Apple's net profit growth exceeded 70% from 2010 to 2012, and its share price rose 110% over three years. But after earnings growth slowed from 2013 to 2016, the company expanded dividends and share buybacks. During that period, shareholder returns as a share of free cash flow rose to an average of 64%. Later, from 2019 to 2021, that ratio climbed to an average of 121%, cementing Apple's image as a high-dividend stock, and its share price rose more than 200% over three years.
Lee Jae-man, a researcher at Hana Securities, said, "If we look at Apple's transformation in the past, Samsung Electronics may be a company that can post stock returns in line with the KOSPI rather than emerge as a new market leader until it develops a clear image as a high-dividend stock."
As the second half of the year approaches, foreign investors have tended to focus more on next year's earnings growth than on near-term results. Over the past three years, the 12-month expected net profit growth rates of the sectors that ranked among the top foreign net buys from September to November improved, while those of the top net sellers slowed.
Hana Securities said that if the current trend continues, with the U.S. ISM manufacturing index rising and core inflation falling, the sectors whose 12-month expected net profit growth rates could be higher in November than they are now include autos and transportation, communication services, pharmaceuticals and biotech, securities, power equipment, secondary batteries, IT hardware, and energy.
Among them, autos and transportation, communication services, pharmaceuticals and biotech, power equipment, secondary batteries, and IT hardware all have foreign ownership levels below their recent peaks. Auto stocks are 5.9 percentage points below their peak foreign ownership level, while power equipment is down 4.3 points, suggesting additional upside if buying interest returns.
The stock-specific candidates are also clear. Hana Securities named Samsung Electro-Mechanics, Hyundai Motor Company, Samsung Biologics, Hanwha Aerospace, and Samsung C&T as companies that are expected to post higher 12-month forward net profit, attract foreign buying, and benefit from earnings growth in 2027 or recent upward revisions to earnings estimates.
Lee said, "In the second half, it is important to keep in mind that foreign investors also build portfolios based on next year's earnings growth rate." He added, "Increasing exposure to autos, transportation, communication services, pharmaceuticals and biotech, power equipment, secondary batteries, and IT hardware, where foreign ownership has fallen from its peak, is a strategy to prepare for the possibility of future foreign inflows."

[email protected] Choi Doo-sun Reporter