Foreigners have a taste for local shares

Foreigners have a taste for local shares

Nov 28, 2005

Listed companies with high foreign shareholdings show higher profits and less debt

Foreigners are on a buying spree for Asian tech shares this month, spending nearly $5.31 billion to purchase emerging Asian market shares (excluding Japan).

Of the $5.31 billion invested this month, $43.5 billion had been to buy Taiwanese tech shares, according to a report by the Korea Exchange released last week.

This is a dramatic turnaround from the massive selling of Asian shares of nearly $4.35 billion last month.

As for the Korean market this month, foreigners spent 448.8 billion won ($431.7 million) to buy local electronics shares, and 362.9 billion won ($349.3 million) to buy financial shares. However, November's buying streak is following a sell-mode in the August-October period, during which foreign players sold shares worth $4.32 billion on the main bourse.

The Korean market posted the highest overall share price increase among emerging Asian markets at 43.1 percent, the report said.

Kookmin Bank, Korea's largest lender, has been the hottest buy-item for foreign investors this year, with a net purchase of 633.1 billion won worth of Kookmin stock, boosting the price of the stock by 56.30 percent from a year ago.

The hottest sell-item this year has been Hyundai Motor. Foreign investors dumped the 1.21 trillion won worth of the stock during the first 11 months of the year. But the company's stock price gained 47.93 percent from the previous year.

Separately, business groups with higher foreign share holdings have shown higher net profits and less debt, according a recent survey report by the Korea Exchange.

It showed that of the 506 companies surveyed, a mere 22, or 4.35 percent reported foreign share holdings of 50 percent or higher.

However, this group was responsible for 24 percent of sales and 39.6 percent of operating profits of the total surveyed group, signaling that foreigners go for enterprises that record healthy profit levels.

The report also showed that the business groups with more than 50 percent foreign share holdings posted a ratio of operating profit to sales of 13.5 percent, compared to the average 8.2 percent.

The report also showed that companies with high foreign shareholding showed a low debt ratio, an index indicating the level of a company's financial stability.

Companies with 50 percent or higher foreign share holdings reported 45.7 percent debt ratio. This compares with 110.3 percent recorded by the firms with less than 10 percent foreign shareholdership. The overall average of the group was 86.8 percent.

Among the businesses with 50 percent or higher foreign shareholdings, KT&G posted the highest ratio of operating profit to sales of 31.08 percent.

POSCO came next at 29.25 percent and Hyundai Development Co. at 17.47 percent.