Semiconductors, which drove up group valuations during the rally, have become the biggest drag in the downturn. As the KOSPI fell more than 18% from the 7,000 level to the 5,700 level, 818 trillion won ($570 billion) in market value disappeared from Samsung and SK alone. SK, though smaller than Samsung by market value, lost about 106 trillion won more. Seven groups including KT&G, HMM and Celltrion, by contrast, grew even in the falling market. Companies drawing attention for dividends and earnings expectations held up, and in some cases affiliates other than the flagship company propped up group valuations.
A tally of 264 listed stocks belonging to business groups on the Korea Exchange showed on the 21st that the combined market value of 44 groups fell to 4,008.4712 trillion won from 4,973.3301 trillion won on the 2nd of this month, a decline of 964.859 trillion won, or 19.40%. That means about one-fifth of their market value vanished in less than three weeks. Over the same period, the KOSPI dropped 1,268.08 points, or 18.11%, to 5,735.66 from 7,003.74.
The market has yet to stabilize. Stocks fell on eight of the 11 trading sessions in that span, and a sell-side sidecar was triggered on the KOSPI on the 13th. The index rebounded sharply enough on the 21st to trigger a buy-side sidecar, but not enough to recover early-October levels. Amid the alternating plunges and rebounds, group scorecards diverged widely.
The steepest declines came at Samsung and SK, the groups that had led the rally. Their combined decline of 818.3604 trillion won accounted for 84.8% of the total net decline across the 44 groups. SK Group's market value fell 461.9555 trillion won, or 28.61%, to 1,152.9371 trillion won on the 21st from 1,614.8927 trillion won on the 2nd. Samsung Group's fell 356.4049 trillion won, or 17.37%, to 1,695.814 trillion won from 2,052.2189 trillion won. Although SK is smaller than Samsung, its decline was 105.5506 trillion won larger and its rate of decline was 11.24 percentage points steeper.
The core affiliates that had inflated group valuations widened the losses this time. SK hynix (000660.KS) lost 399.5793 trillion won in market value, and SK Square (402340.KS) shed 50.263 trillion won. SK hynix also saw a weakening of the demand support that had underpinned its share price, as it completed a 40 trillion won share buyback on the 21st after two months. At Samsung, the market value of Samsung Electronics (005930.KS) and Samsung Electro-Mechanics (009150.KS) fell 306.9296 trillion won and 30.8485 trillion won, respectively. As the core affiliates' shares wobbled, the groups' overall size shrank rapidly.
Some investors, meanwhile, moved to find opportunity in the undervaluation. Lee Chang-hwan, chief executive of Align Partners Asset Management, disclosed at an investor event in New York on the 20th that funds it manages and advises hold about a 1.5% stake in SK Inc. Lee said SK hynix's stake value is being discounted twice — once at SK Square, the intermediate holding company, and again at SK Inc., the top holding company — and said he expects a re-rating of the share price following a corporate value enhancement plan that SK Inc. is expected to announce this year.
Among the larger groups, those that fell less moved up the rankings. LG rose to No. 3 from No. 4 as its rate of decline was smaller than Hyundai Motor's, and Hanwha climbed to No. 5 from No. 6 on a smaller drop than HD Hyundai's. POSCO also rose to No. 8 from No. 9 as its market value fell less than LS's. Celltrion moved to No. 9 from No. 10 as its market value actually increased, while LS, passed by the two groups, slipped to No. 10 from No. 8.
By contrast, some relatively smaller groups grew even in the falling market. KT&G posted the biggest percentage gain at 9.53%, followed by HMM (8.84%), Celltrion (7.75%), SM (7.19%), Harim (3.47%), Netmarble (251270.KS) (2.75%) and Hankook & Company Group (0.67%). In won terms, Celltrion's gain was the largest at 3.4239 trillion won. HMM and KT&G added 1.7922 trillion won and 1.7678 trillion won, respectively.
These groups drew attention for shareholder returns, expectations of improving earnings and favorable developments at individual affiliates. For KT&G, expectations for a larger dividend and a new shareholder return policy were cited as investment appeal. HMM benefited from an improved profit outlook on strong container freight rates, while Celltrion drew attention for earnings stability underpinned by growth in new products.
In some cases, other affiliates picked up the slack while the flagship company faltered. Netmarble's shares fell 2.55% over the period, but Coway (021240.KS) rose 4.92%, lifting the Netmarble group's total market value. At Harim Group, Harim, Sunjin and Farmsco declined, while Pan Ocean (028670.KS) rose 4.65% to provide support. At SM Group, SM Vexel (010580.KQ) surged 71.84% on news that it had secured battery technology for satellites, pulling up the group's market value.
Their resilience was reflected directly in the market value rankings. KT&G overtook DB, Mirae Asset and S-Oil to rise to No. 17 from No. 20. HMM moved ahead of Young Poong, Hanjin and Mirae Asset to jump to No. 14 from No. 17. Netmarble and Harim each climbed one notch, to No. 26 and No. 33.