Shipbuilders and Banks Lifted the KOSPI, Not Chips

A 0.26% gain, and a 243-point intraday range

The KOSPI closed on September 3 at 6,579.48, up 16.76 points or 0.26%. The KOSDAQ fell 13.77 points, or 1.71%, to 790.21, giving up the 800 level.

The close looks quiet; the session was not. The index reached 6,682.97 and fell as low as 6,439.49 before recovering the entire decline into the bell — a range of 243 points.

The afternoon drop followed reports, shortly after 2pm, that Iran had struck US military bases in Kuwait with missiles and drones. Turnover on the main board was 18.89 trillion won, with 424 gainers against 433 decliners.

Shipbuilding, financials, autos and power generation rose

List the day’s gainers and a pattern appears. Samsung Heavy Industries closed 8.58% higher at 21,650 won, HD Hyundai Heavy Industries 3.08% higher at 435,000 won and Hanwha Aerospace 2.15% higher at 1,047,000 won. In financials, KB Financial Group rose 5.20%, Shinhan 3.62% and Samsung Life 3.06%. Doosan Enerbility added 3.39%, Kia 2.41% and Hyundai Motor 1.46%.

Technology sat on the other side. Samsung Electro-Mechanics fell 3.71%, Alteogen 5.19% and APR 3.10%. Samsung Biologics lost 1.60%, Hanmi Semiconductor 1.41%, SK Hynix 1.05% and Samsung Electronics 0.20%.

Shipbuilders were strong from the open, with Hanwha Ocean, Daehan Shipbuilding and HD Korea Shipbuilding all higher. Samsung Heavy opened up around a percent and widened the gain through the afternoon. The catalyst on record is an August 31 disclosure: two container ships ordered for 444.5 billion won.

The bid under the index came from the companies themselves

Sector rotation explains which stocks rose. It does not explain how the index finished higher, and for that the flow table is the place to look.

Retail investors sold a net 539.7 billion won on the main board, foreigners 486.7 billion and institutions 634.0 billion, against net buying of 1.67 trillion won by the category the exchange calls other corporations. The three groups’ combined selling and that single number are almost identical.

That category has grown because of buybacks. When a listed company purchases its own stock, the exchange records it under other corporations, and the programs running at Samsung Electronics and SK Hynix fall into that line. Etoday puts recent daily net buying in the category at around 1.6 trillion won.

So the session had two layers: buybacks holding up the large caps from below, and shipbuilders, banks and automakers pulling the index up from above. Neither layer is new investment demand arriving.

The KOSDAQ gave up 800

The two indices parted ways. The KOSDAQ has no mega caps buying back their own shares, and most of the stocks that rose on the day are listed on the main board.

CBC News reports that on the KOSDAQ retail investors bought a net 340.3 billion won while institutions sold 197.4 billion and foreigners 132.0 billion. Alteogen, the largest KOSDAQ stock by market value, fell 5.19% to 283,000 won; Simmtech fell 4.78%, Wonik IPS 4.28% and Jusung Engineering 3.28%.

The currency moved the other way from equities. The won closed at 1,357.0 per dollar on the 16:26 Hana Bank notice, down 0.24%, while the Seoul market’s daytime session settled 9.4 won lower at 1,359.3.

Today's Foreign Investor Flows

What to watch next session

First, the Middle East. The afternoon drop followed reports of strikes on US bases in Kuwait, so further escalation would widen intraday ranges again.

Second, whether the shipbuilding move holds. An August 31 order worth 444.5 billion won does not account for an 8.58% day, so the test is whether documented news follows it.

Third, whether the corporate bid continues. Buybacks run for a disclosed period and a disclosed amount, so they end. On the day that bid thins, a session like this one does not produce the same close if the other three groups are still selling.

Fourth, whether the strength in financials lasts beyond a day. It rests on US yields staying high; if they fall back, so does the case for it.

Three things worth noting

Photo: naotakem / Flickr (BY 2.0)

Set the flows side by side and the source of the gain narrows to one line. The Public reports main-board net selling of 539.7 billion won from retail, 486.7 billion from foreigners and 634.0 billion from institutions, against net buying of 1.67 trillion won from other corporations. The three groups sold 1.66 trillion won combined, and that single category took almost all of it.

Other corporations do not usually drive the index. The line has grown because Samsung Electronics and SK Hynix are buying their own stock, and the exchange books corporate treasury purchases there. Etoday reports the category has been running near 1.6 trillion won a day.

Both of those stocks still finished lower — Samsung Electronics down 0.20%, SK Hynix down 1.05%. The buyback did not lift them; it put a floor under them. Recovering from the 6,400s says the floor held. It does not say sentiment turned, not on a day when foreigners and institutions both sold.

That leaves one thing to track. Buybacks happen only within the disclosed window and amount. Where the other three groups stand when that bid thins is what decides the next phase.

Samsung Heavy Industries closed 8.58% higher at 21,650 won, the largest move on the watchlist, with foreign investors buying a net 1,205,924 shares.

The whole sector moved together. Dongil Steel gained 16%, with Hanwha Ocean, Daehan Shipbuilding and HD Korea Shipbuilding each up around a percent early. Samsung Heavy and HD Hyundai Heavy split in the morning — one modestly higher, the other slightly lower — then widened together in the afternoon to close up 8.58% and 3.08%.

The catalyst on record is an August 31 disclosure: an order for two container ships from an African shipping company worth 444.5 billion won. An order that size does not account for an 8% day.

Which makes the next session the test. Either documented news follows — an order, a policy decision — or the move gives itself back.

The sectors that rose were not growth names. KB Financial Group closed 5.20% higher at 177,900 won, Shinhan 3.62% higher at 114,500 won and Samsung Life 3.06% higher at 303,000 won. Money Today reports the KRX insurance index closed 3.65% higher at 4,603.67 and the KRX bank index 2.51% higher at 1,736.61.

Semiconductors sat on the other side: Samsung Electro-Mechanics down 3.71%, Hanmi Semiconductor 1.41%, SK Hynix 1.05% and Samsung Electronics 0.20%. On the KOSDAQ, chip equipment fell together — Simmtech 4.78%, Wonik IPS 4.28%, Jusung Engineering 3.28%.

Both sides rest on the same assumption: that US market yields stay high. High yields lift investment income at insurers and banks, and raise the discount applied to earnings that chipmakers and equipment suppliers will not book for years.

The move was not uniform even within financials — Woori Financial Group added only 0.43%. And because the case rests on a rate assumption rather than on results, it changes when the assumption does.

Sources

• Edaily Korean-language article
• EBN Korean-language article
• thepublic.kr Korean-language article
• Etoday Korean-language article
• Money Today Korean-language article
• Blockmedia Korean-language article
• CBC News Korean-language article
• Aju Business Daily Korean-language article
• wikitree.co.kr Korean-language article
• CBC News Korean-language article
• gukjenews.com Korean-language article