Investors on the sidelines as they await the mega-arrival of LG Energy Solution

[Photo by Yonhap]

Korean markets stay lackluster as institutional investors save ammunition for the mega debut of LG Energy Solution after $11 billion initial public offering.

On Monday, Kospi fell 1.09 percent to close at 2,890.10, going below 2,900 for the second time this month. Foreign and institutional investors net sold 253.7 billion won ($212.7 million) and 259.3 billion won, respectively, while retail investors net purchased 482.5 billion won.

Institutions are expected to return after the winding up of LG Energy Solution’s public subscription, running for two days from Tuesday. LG Energy Solution, the world’s second largest electric vehicle battery supplier spun off from LG Chem, completed book building last week with $13 trillion worth orders received from institutions for its $11 billion IPO.

Local institutional investors have net sold 5.3 trillion won in Kospi over the past three weeks. LG Energy Solution shares could become No. 2 or 3 once they trade on the Kospi late this month depending on the performance when its price debut at doubled IPO price of 300,000 won. The stock is headed straight for the Kospi 200 and MSCI Korea index.

“Historically, institutions’ net sale on Kospi lasted for three weeks prior to 1 trillion won or greater IPOs, then they slowed net selling or even reversed to net buying afterwards,” noted Lee Jae-man, analyst at Hana Financial Investment. The Kospi already touched its low end of 2,840 to have 97 percent of projected correction completed, Lee said, predicting the Kospi reversing direction to the north.

[Source: LG Energy Solution Ltd.]

Investors are recommended buy in semiconductor category with the stocks’ return on equity (ROE) expected to improve price-to-book (P/B) ratio, for comparing market capitalization to book value, as it has gone down at this time of market correction, said Lee.

The analyst also recommended media and IT hardware stocks, as they had undergone radical P/B ratio corrections that they would show sharp improvement on rise in ROE.

Other stocks worth greater investment are secondary battery related stocks, such as Creative & Innovative System Corp, TSI Co, and L&F Co.

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