Kakao stock faces mass foreign outflow after hitting record highs

2017.09.25 15:21:20 | 2017.09.26 08:40:48

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Foreign investors are on a selling spree of Kakao Corp., South Korea’s leading mobile messenger operator, betting that its sky-high shares are poised for a downward turn amid the lack of positive momentum onwards.

Data from the Korea Exchange (KRX) showed that during the two days from September 21 to 22, foreign investors net sold 7.8 billion won ($6.9 million) worth of Kakao shares, contrary to local retail and institutional investors who have continued to show voracious appetite for the stock.

But foreign outflow was not limited to those two sessions. Their net selling has rapidly grown this month after Kakao stocks hit new 52-week highs, indicating a growing sentiment among overseas investors that the firm’s stocks may be overly priced and ready to head for a decline.

Kakao’s stocks, which finished the first day of this year’s trading at 76,700 won, topped 140,000 won on September 20, posting a staggering 80 percent growth so far this year. The company largely owed its stellar performance to two major events - the firm’s relisting on the main bourse Kospi from the secondary Kosdaq and the rollout of Kakao Bank, the country’s second online-only bank. Thanks to the strong demand for its stocks, Kakao has become the 35th largest firm on the Kospi with its market capitalization nearing 10 trillion won.

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But the lack of fresh momentum has recently spurred the foreign selloff in the Korean tech firm. Foreigners who net purchased 24.5 billion won worth of Kakao shares in July and 29.9 billion won in August turned into net sellers of the stock with their net sales reaching nearly 100 billion won this month alone.

According to the KRX, the short-selling balance of Kakao stocks also hit 415.3 billion won as of September 22, a surge from the 200 billion won range maintained until August. This suggests that a growing number of investors are betting on a fall in Kakao stocks. Global institutional investors including Goldman Sachs, Morgan Stanley and Credit Suisse appear to have held a massive short-selling balance.

Market analysts also predicted that Kakao’s weakened growth momentum will further weigh on its stock performance. Kakao raked in 38.3 billion won in operating profit in the first quarter ended March this year and 44.6 billion won in the following quarter. But analysts projected that the company would see modest earnings gain of 43.6 billion won and 53.9 billion won in the remaining quarters for this year.

It would be hard to expect a "surprise" in Kakao earnings for a while, market analysts said, citing increased marketing costs for the firm’s new games and services such as the mobile content platform KakaoPage and chauffeur service KakaoDriver.

Shares of Kakao closed Monday unchanged at 138,500 won.

By Chung Woo-sung

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