Individual investors outperform foreigners on buying Kosdaq-listed stocks

[Image source: Gettyimagesbank]

Individual investors posted an average of 6.9 percent return in their stock investment in March helped by a surge in battery-related companies such as EcoPro Co., marking a higher return than the 5 percent seen among foreign investors.

Experts say, however, the current stock price uptrend among those battery companies driven by individual investors is ungrounded, warning of overheating. In contrast to the individual investors’ preference for Kosdaq-listed battery companies, foreign investors sold a net 1.6 trillion won ($1.26 billion) during the first 29 days of this month, turning from a buying trend earlier in the year with net purchases of 7.6 trillion won in the first two months.

Foreign investors sold more on the Kosdaq, with net sales of 95.6 billion won, while they sold 68.4 billion won on the Kospi. In the meantime, individual investors mostly flocked to EcoPro Group shares.

According to data from Korea Exchange on Wednesday, the top five stocks with the largest net purchases by individuals in March were EcoPro, with net purchases of 94.8 billion won, EcoPro BM Co., with 67.7 billion won, POSCO Holdings Inc. 37.7 billion won, SK hynix Inc. 196 billion won and Shinhan Financial Group Co. 176 billion won. Among these, EcoPro saw the biggest rise in March of 51.8 percent, followed by EcoPro BM at 34.7 percent, from Feb. 28 to March 28.

On Wednesday, EcoPro shares rose again, up 14.99 percent from the day before. The transaction volume for the company, with a market capitalization of 12.86 trillion won, was 1.28 trillion won on the day alone, mostly bought by individual investors. Ecopro BM also rose more than 4% that same day.

The uptrend in Ecopro Group stocks is being driven by individual investors who expect further gains. Short selling is waning as individuals continue to buy. Short selling accounted for as much as 20 percent of EcoPro transactions in February, but has fallen to around 4 percent as of Tuesday. Short selling of EcoPro BM accounted for as high as 29 percent of the company’s equity trades at the end of January, but that has now fallen to the 6 percent range.

Investors who were short selling, expecting a downtrend in prices, seem to now be liquidating their holdings, as they predict a steep price rise now. Some analysts say that the price uptrend became steeper driven by the liquidation.

EcoPro Co. logo [Courtesy of EcoPro]

Individuals heavily bought other battery stocks in March, but the focus was mostly on Kosdaq-listed companies like EcoPro Group companies, rather than Kospi-listed LG Energy Solution Ltd. or Samsung SDI Co. Among the top five most bought KOSDAQ companies by individuals were Advanced Nano Products Co. at 112 billion won and Chunbo Co. at 108 billion won.

Brokerage insiders say there should be corrections among battery stocks after the latest bullish trend.

“There is growing demand recently to win gains on battery stocks,” said Shinhan Securities Co. analyst Choi Yoo-june. “That could lead to an outpouring of stocks for sales for a while.”

Unlike individual investors, foreigners and institutions are selling battery stocks. As for EcoPro, institutional investors have continued a net selling trend since Feb. 3, except for one day. Foreigners have also net sold more than 1.2 million shares of the company this month.

Frenzies among individual investors for battery stocks are leading to a growth in margin trading. As of Tuesday, Kosdaq’s credit outstanding was 9.34 trillion won, exceeding the Kospi’s credit outstanding for five days since March 22, according to the Korea Financial Investment Association on Wednesday. Kosdaq’s credit outstanding was never bigger than that of Kospi in 2021 and 2022. Kospi’s credit outstanding, as of Tuesday, was 9.07 trillion won.

Individuals and foreigners are moving in different directions on semiconductor stocks. While individual investors sold a net 926 billion won of Samsung Electronics Co. in March, foreign investors remain as net buyers, probably due to revived investor sentiment on prospects that the industry will improve after hitting bottom in the second quarter.

For SK hynix, individual investors mostly bought the chipmaker’s stock, while foreign investors are selling the company’s stock. SK hynix is the fourth-largest net bought company by individual investors, while the company is ranked as second among foreigners’ net-selling companies.

Individual investors outperformed foreigners mostly led by high performing EcoPro Group shares, but it is questionable whether their performance can be sustained as they mostly lost on other stocks. Foreigners, on the other hand, earned balanced gains in most of their holdings of net purchases.