[Created using ChatGPT]
[Created using ChatGPT]

Foreign investors returning to the South Korean stock market are aggressively accumulating shares in the so-called "S7" — a basket comprising Samsung Electronics, SK Hynix, SK Square, Samsung Electronics preferred shares, Samsung Electro-Mechanics, Samsung C&T and Samsung Life Insurance. Nearly 5.6 trillion won ($3.96 billion) in foreign capital flowed into Samsung Electronics and SK Hynix alone this week, while net purchases continued in SK Square, Samsung C&T and Samsung Life Insurance. Brokerages are also issuing positive outlooks on S7 stocks, citing expanding AI investment, improving earnings and shareholder return programs.

According to Korea Exchange data, foreign investors net-bought 7.84 trillion won worth of Kospi-listed shares from Monday through Friday. Samsung Electronics and SK Hynix led the inflows, with net purchases of 2.8 trillion won and 2.79 trillion won, respectively. Combined, the two stocks absorbed 5.59 trillion won — equivalent to 71.3 percent of total foreign net purchases on the Kospi over the same period.

Foreign capital also flowed into other S7 names. Investors net-bought 316.2 billion won in SK Square, along with 107.5 billion won in Samsung Electronics preferred shares, 47.2 billion won in Samsung C&T and 16.2 billion won in Samsung Life Insurance. Samsung Electro-Mechanics was the only S7 stock to see net selling, with foreigners offloading 68.5 billion won.

Brokerages are paying close attention to whether the individual catalysts driving each S7 stock can sustain momentum. The AI and memory chip boom at Samsung Electronics and SK Hynix is seen feeding through to SK Square's stake value and Samsung C&T's high-tech construction orders, while shareholder return programs support Samsung Life Insurance's share price and AI server component demand underpins Samsung Electro-Mechanics.

Samsung Electronics and SK Hynix, which attracted the strongest foreign buying, are drawing attention for both earnings and shareholder return prospects. According to financial data provider FnGuide, the consensus 2027 operating profit estimates for the two companies stand at 544.67 trillion won and 391.82 trillion won, respectively, for a combined 936.49 trillion won. Expectations are also growing that both companies will announce additional shareholder return measures in the third quarter, on top of the outlook for sustained AI investment growth and a prolonged memory chip supply shortage.

SK Square, which ranked third in foreign net purchases behind Samsung Electronics and SK Hynix, is attracting investors on the strength of SK Hynix's rising corporate value. Daishin Securities raised its target price for SK Square from 1.87 million won to 2.1 million won, reflecting the increase in SK Hynix's market capitalization — which accounts for 98 percent of SK Square's net asset value — as well as a premium on SK Hynix's US depositary receipts. Kim Hoe-jae, an analyst at Daishin Securities, cited KT Corp as a reference case, noting that when KT Corp's DR premium expanded in the past, its domestic shares rose 2 to 62 percent in tandem, and said the same dynamic could apply to SK Hynix's domestic shares.

Samsung-affiliated S7 stocks are also buoyed by earnings and shareholder return expectations. Kyobo Securities raised its target price for Samsung Life Insurance from 330,000 won to 380,000 won, citing growth in the contractual service margin from higher protection-type insurance sales, improved earnings at subsidiaries and dividend expectations tied to gains on investment assets. Kim Ji-young, an analyst at Kyobo Securities, said consolidated earnings are expected to remain solid on the back of subsidiary performance driven by a buoyant stock market, adding that dividend prospects from investment asset valuation gains are also a positive.

Samsung C&T is seen benefiting on two fronts: Samsung Electronics' expanded semiconductor investment and stronger shareholder returns. Samsung C&T's construction division handles high-tech semiconductor factory projects for Samsung Electronics both domestically and abroad, so any increase in chip investment translates directly into higher orders. High-tech orders already reached 6.4 trillion won in the first half of this year alone, approaching the full-year target of 6.8 trillion won. Shinyoung Securities said that with additional orders expected in the second half, the total could surpass the all-time high of 12.3 trillion won. Analysts also noted that if Samsung Electronics issues a special dividend, the affiliate dividend income flowing to Samsung C&T would increase, potentially supporting a broader dividend payout. Samsung C&T has a policy of returning 60 to 70 percent of affiliate dividend income to shareholders for the 2026–2028 period.

Even Samsung Electro-Mechanics — the only S7 stock that saw foreign net selling this week — is drawing positive assessments from brokerages. Yuanta Securities Korea on Tuesday maintained its top sector pick rating and a target price of 2.3 million won for Samsung Electro-Mechanics, citing rising multilayer ceramic capacitor prices driven by AI server demand and the potential for expanded long-term supply agreements. The target represents a roughly 47.6 percent premium to the closing price of 1.558 million won on Friday. Yuanta Securities Korea noted that as production lines shift toward server-grade MLCCs, supply of general-purpose products is tightening, and that MLCC price increases in distribution channels have widened from 10 percent on some PC-oriented products in May to 30 percent across all product lines in July.

Ko Seon-young, an analyst at Yuanta Securities Korea, said the company is in discussions to sign more than 10 long-term supply agreements to meet demand for ultra-high-voltage and high-capacity MLCCs for high-performance AI servers. "Proactive investment expansion anchored by long-term agreements will serve as a structural mechanism that strengthens earnings resilience against future cycle swings," Ko said.


hajun825@heraldcorp.com