Chinese investors are on a veritable shopping spree for shares in South Korean companies.

 

In just one year, the number of listed South Korean companies with Chinese investors holding a stake of 5% or more has doubled. Annual investment from China has also more than tripled in the last five years. But whereas US and European businesses often invest for dividend and margins, more than half of the Chinese investors are looking to have a role in management.

 

The Korea 20,000 Company Research Institute released findings on Apr. 4 from a survey of the foreign investment situation at South Korea’s listed companies. The institute, headed by director Oh Il-seon, identified 50 out of 2,041 listed companies as of Mar. 18 where Chinese or Hong Kong investors owned 5% or more of shares.

 

The number is a 100% increase from the 25 counted on year before. The appraised value of shares in cases where Chinese investors owned stakes of 5% or more amounted to 4.4745 trillion won (US$3.9 billion) as of Mar. 21 - an increase of 3.6 times from 1.2445 trillion won (US$1.1 billion) a year earlier.

 

At around 20 of the 50 listed companies with over 5% Chinese ownership, the Chinese investors were found to be the largest individual shareholders. At 28 of them - 56% - their stated goal in ownership was not simple investment, but “a role in management.” The situation was different from US and European investors, who tend to simply invest for dividends and margins rather than participating directly in management.

 

The types of listed companies where Chinese investors are the largest shareholders have also diversified. The list includes Dongyang Life in finance and the vehicle dash camera makers Midong Electronics and Communication, robot makers DST Robot, wireless communication device company Locojoy, and MP3 makers Cowon in information technology. Companies in the area of “Korean Wave” popular culture include the miniseries production company Chorokbaem Media, animation makers Red Rover, and music service Soribada.

 

The amount of Chinese investment in South Korea has nearly tripled in the last five years. Foreign investment statistics from the Ministry of Trade, Industry and Energy showed an increase from 405 investments totaling US$651 million in 2011 to 512 investments totaling US$727 million in 2012. The amount shrank slightly to 402 investments and US$481 million in 2013 before rocketing to 525 investments and US$1.189 billion in 2014 and 685 investments and US$1.978 billion in 2015.

 

The year 2015 also marked the first time Chinese investment surpassed Japanese investment, which totaled US$1.665 billion. Data on direct investment trends among foreigners published by the ministry on Apr. 4 for the first quarter of this year showed reported Chinese investment of US$375 million - more than double the US$161 million from Japanese investors.

 

Oh Il-seon explained that it was “difficult to confirm participation by Chinese investors because the law does not require official announcement when shareholders own stakes of less than 5%.”

 

“The total number of listed companies where Chinese investors own shares is probably much higher,” he added.

 

In all, 322 listed companies were counted as having more than 5% foreign ownership, an increase of 37 (13%) from the year before. US investors accounted for the most cases at 121 (37%), followed by China in second place.

 

 

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