The number of South Korean stocks trading above 1 million won a share has fallen back to six, after rising from four at the start of the year to 12. The drop came as shares that had climbed steeply in the first half on growth expectations in artificial intelligence and defense collapsed quickly during the market correction.
Based on the regular session close on the 21st, the six stocks above 1 million won were Hyosung Heavy Industries (298040.KS), Samsung Biologics (207940.KS), SK hynix (000660.KS), Samyang Foods (003230.KS), Samsung Electro-Mechanics (009150.KS) and Doosan (000150.KS), according to the Korea Exchange. The group still numbered nine at the end of last month, when the declines had paused, before shrinking again this month.
At the beginning of the year, there were four such stocks: Hyosung Heavy Industries, Samsung Biologics, Korea Zinc (010130.KS) and Samyang Foods. Shares of semiconductor, power equipment and defense companies then rose steeply, bringing in Hanwha Aerospace, SK Square and HD Hyundai Electric. On May 26, electronic components maker LG Innotek (011070.KS) also topped 1 million won, lifting the group to 12.
The picture reversed after the KOSPI, which had broken above 9,000, turned lower in June. The index has fallen 28.7% from May 26 through the 21st, and eight of the 12 stocks that were above 1 million won at that time fell more than the index.
Among the stocks that dropped out of the group, LG Innotek fell the most. Its shares plunged 62% to 406,000 won from 1.068 million won at the May 26 close, when it first joined the group. HD Hyundai Electric fell 56.5% to 499,000 won from 1.148 million won. SK Square (down 34%), Korea Zinc (down 36.8%) and Hanwha Aerospace (down 34.9%) also lost more than 30%. For SK Square, the decline is steep considering that the stock closed as high as 1.97 million won in June. Taekwang Industrial fell 15.9% to 857,000 won from 1.019 million won.
Stocks that held above the 1 million-won mark were also hit hard. Hyosung Heavy Industries fell 49.2% over the same period to 1.949 million won from 3.834 million won. Doosan (down 40.7%), SK hynix (down 36.9%) and Samsung Electro-Mechanics (down 25.7%) also posted large declines.
By contrast, Samsung Biologics and Samyang Foods fell just 0.6% and 3.2%, respectively. Because volatility in the Korean market stemmed mainly from the outlook for the semiconductor and AI industries, shares of the two companies, which focus on biopharmaceuticals and food, were relatively stable during the correction.
Financial investment industry officials say that because the rally in most of these stocks, led by chipmakers, was driven by expectations that high profits would be sustained, the declines were particularly steep in the market after June, when those expectations were undermined. Brokerages still expect expanded AI investment to translate into higher corporate earnings, but concerns over how long that high profitability can last are weighing on prices.
Earnings expectations have also been lowered at some companies. Hanwha Investment & Securities recently cut its forecast for Korea Zinc's operating profit this year by 7.9% to 2.0271 trillion won from 2.2008 trillion won, reflecting a stronger won against the dollar and the burden of high-priced raw materials. In a report the previous day, DS Investment & Securities projected Hanwha Aerospace's third-quarter operating profit at 980.5 billion won, about 17% below the market consensus of 1.18 trillion won, reflecting delays in recognizing revenue from export volumes.
Meanwhile, the KOSPI, which had tumbled 3.73% the previous day, closed at 5,735.66 on the 21st, up 182.92 points, or 3.29%, from the previous session. Analysts attributed the gain to bargain hunting centered on chip stocks, following an earnings surprise at U.S. server maker Super Micro Computer and declines in international oil prices and interest rates. A buy-side sidecar was also triggered for the first time in about two months, since Aug. 20 of this year.
