April 25, 2024

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[THE INVESTOR] Foreign investors have renewed their interest in K-beauty stocks, according to industry sources on March 14.

US-based Capital Group has been gobbling up Amorepacific stocks and as of March 3 owns 8.50 percent stake in the company.

It has become the third-largest stakeholder in the South Korean cosmetics giant, whose shares have been hit by China’s retaliatory actions over THAAD deployment. Amorepacific Group owns 35.40 percent stake and Chairman Suh Kyung-bae has 10.72 percent. 

The US firm, known for its long-term investment strategies, first announced that it owns over 5 percent stake in November 2016. It has been heavily investing in Amorepacific despite China’s heightening sanctions, betting on the long-term fundamentals of the company, said an industry source. 

Amorepacific was the third favorite among foreign investors last week, following Samsung Electronics and LG Electronics, as they purchased its shares worth 80 billion won (US$69.55 million). Local institutions sold stocks worth 47 billion won.

Goldman Sachs in March released a report noting that US and European investors are still largely interested in Amorepacific and LG Household and Health Care, the two largest K-beauty firms, regardless of decline in share price following China’s actions. 

This has prompted local investors to reevaluate stocks that have suffered directly or indirectly from the row. 

In addition to reassessing stocks that suffered from the punitive actions, NH Investment and Securities is also reexamining other indirect victims. “There are quite a few such as Lotte Chemical and Lotte Hi Mart whose stock price fell for being part of Lotte Group, although China’s actions almost have no effect on their business,” said Lee Chang-mok, head of its research center. 

Analyst Na Eun-chae of Korea Investment and Securities was more cautious, saying that while it is true that foreign investors are focusing on Amorepacific, they have increased their stake by only 1 percent, which means some have sold their stakes. 

By Hwang You-mee (glamazon@heraldcorp.com)