Construction stocks in bull run in Korea’s bear market

Korean construction stocks have stood out as going against the general foreign selling spree that pushed the headline index to its lowest level in more than a year.

Four out of the top 10 Korean stocks cherry-picked by foreign investors from Sept. 28 to Oct. 11 came from the construction category, according to data from Korea Exchange on Sunday.

Samsung Engineering Co. topped the list by drawing foreign net purchases of 92.2 billion won ($81.4 million), followed by Hyundai Engineering & Construction Co. with 42.6 billion won, GS Engineering & Construction Corp. with 22.5 billion won and Daelim Industrial Co. with 22.3 billion won.

Construction companies are expected to continue riding on the housing boom as the government has pledged to supply more public housing in Seoul in hopes to tame runaway prices partly caused by the lack of affordable housing supply around the capital area.

The industry is also buoyant about the global order pipeline, largely from the Middle East, amid rising oil prices.

“The Korean government’s shift in housing policy to increase supply will help boost construction at home,” said Song You-lim, an analyst at Hanwha Investment & Securities Co. “Coupled with overseas projects coming out from next year, the construction sector is expected to enjoy solid growth.”

Samsung Engineering, whose sales stayed sluggish from the second quarter of 2017 to the first quarter of this year, is expected to make a turnaround from the third quarter on increased overseas deals. Its order backlog in the first half of the year reached 13.8 trillion won, a five-year high. It also clinched new orders worth 6.3 trillion won over the same period, already achieving 74 percent of last year’s total.

Hyundai E&C experienced a delay in some of its third-quarter orders but is also forecast to see a steady stream of deals ahead. “Hyundai E&C’s consolidated overseas deals this year are estimated to surge 60.2 percent on year to 10.6 trillion won,” said Oh Kyeong-seok, an analyst at Shinhan Investment Corp.

GS E&C and Daelim Industrial are projected to see their operating profit this year jump by 219.9 percent and 51.1 percent, respectively, according to Seoul market data provider FnGuide.

On Monday, shares of Samsung Engineering gained 1.07 percent to close at 18,850 won. Hyundai E&C was down 2.15 percent at 54,500 won, GS E&C down 2.96 percent at 49,200 won, and Daelim Industrial down 0.24 percent at 81,600 won.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]