A recent rally in Korean stocks is prompting a number of after-hours block trades of shares

Oct 23, 2013

South Korean Share Rally Prompts Stake Sales

By Kanga Kong

A recent rally in Korean stocks is prompting a number of after-hours block trades of shares. Just a day after France’s BNP Paribas SAraised $192.4 million by selling 1% of Seoul-based Shinhan Financial Group055550.SE -2.96% in block trades, Korea Exchange Bank sold a 2.9% holding in its parent Hana Financial Group086790.SE -2.78% to raise $321 million, while Industrial Bank of Korea024110.SE -0.40% offloaded all of its 3.4% stake in Shinsegae Co.004170.SE -3.16%for $82 million, both late Tuesday, according to people familiar with the companies’ plans.Korea Exchange Bank, now a unit of Hana Financial Group, came to own some 12.7 million shares of its parent as part of Hana’s plan to increase its ownership in KEB to 100% from 60% via a share swap earlier this year.

What was offered for sale this time was some 8.4 million shares, which were sold at 40,520 won ($38.2) a unit, or a  2% discount to the share’s closing price of 41,350 won on Tuesday, a person who has direct knowledge of the transaction said.

In a separate deal, Industrial Bank of Korea disposed of all of its 331,803 shares in department store operator Shinsegae at 261,000  won apiece, according to a person familiar with the transaction and IBK. That represents a 3% discount to Shinsegae’s last closing share price of 269,000 won.

IBK, 68.9% owned by the Ministry of Strategy and Finance, and mandated to provide financing to small- and mid-sized firms, came to own the shares in 2008 when the government increased IBK’s capital by granting the shares. As Shinsegae was split into two entities in 2011–Shinsegae and discount store chain E-MART Co.139480.SE -1.59%–IBK became the owner of a 3.4% stake each in both companies.

The Hana-KEB and IBK-Shinsegae transactions were handled by Goldman SachsGS -0.33%.

The block trades come as the main Kospi market trades at its highest level in more than two years,  helped by strong foreign investor appetite for cheap stock valuations. The Kospi ended up 0.2% at 2056.12 on Tuesday, its highest close since August 3, 2011. The index is up 15.5% since late-June’s trough.

Since  July, foreigners have bought $13.5 billion of stocks listed on the Kospi, more than reversing the $9.4 billion yanked out in the first six months of the year, according to data provider Yonhap Infomax. International money managers extended their net buying to 39 straight sessions until Wednesday, the longest buying spree on record.

The latest transactions raise questions on whether others who have been waiting for months to sell shares will  follow suit.

The Korean government could be a prime candidate. It needs to pare its stake in IBK to 50% from 68.9% now. Its last share sale attempt in June 2011 failed. The finance ministry was then trying to sell 45.78 million shares, representing an 8.4% stake in IBK, in after-hours block trades.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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