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South Jeolla chip plant plans trigger speculative rally in local stocks
A rendering of SK Group's semiconductor cluster in Yongin, Gyeonggi Province / Courtesy of SK Group
By Ko Dong-hwan
Gwangju Shinsegae's share value jumps 30%, Kumho Tire 11%
Expectations that Samsung Electronics and SK hynix will invest in massive chip plant projects in Gwangju and the surrounding South Jeolla Province have triggered a rally in various companies headquartered in the region.
The rally has been fueled by expectations that the purported large-scale chip plants would spur demand for roads, transportation networks, housing and other public infrastructure needed to support surrounding cities. However, concerns are also growing over speculative buying, as shares of companies with little apparent connection to the semiconductor industry have also fluctuated on the news.
Listed construction firms mostly active in Gwangju and South Jeolla enjoyed the most notable spike.
Kumho E&C hit the daily 30 percent trading limit on Friday after surging 29.9 percent on Wednesday, nearly doubling its share price in just one week. Namhwa Construction, based in Hwasun County of the province, jumped 29.96 percent on Friday.
Industry officials said the rally appears to reflect expectations that the companies would benefit from increased demand for surrounding infrastructure, rather than directly participating in the construction of the chip plants. They said construction firms with an established presence and execution capabilities in the region are likely to be among the biggest beneficiaries.
The rally came after Kim Yong-beom, presidential chief of staff for policy, said Wednesday that a new semiconductor cluster plan involving Samsung Electronics and SK hynix is nearly complete. He added Friday that the scale of the investment would be "unprecedented." The plan is expected to be announced Monday.
Gwangju Shinsegae, which operates a Shinsegae department store and the U-Square bus terminal in the city, saw its shares jump 29.98 percent Friday to close at 52,900 won ($34.44). The rally reflected expectations that a large semiconductor cluster would boost the local economy and consumer spending. Gwangju Shinsegae is a subsidiary of Shinsegae Group.
Kumho Tire's manufacturing plant in Gwangju Metropolitan City's Gwangsan District / Korea Times file
Part of the rally was driven by outdated information or unfounded claims linking companies to the region.
Ilshin Spinning, a medium-size textile company which propelled Gwangju’s economy in the 1970s with a local factory, saw its share value soar 13.16 percent on Friday, in a belief that the company's old factory site could be used for the chip cluster. However, the site was sold to a consortium in 2020 and is undergoing a major urban development project.
Lighting products developer Kumho Electric saw its share value jump 30 percent, as investors mistakenly viewed it as part of Kumho Group, once the largest conglomerate in the region before it was split into separate entities.
Kumho Electric was separated from Kumho Group in 1979 and is now based in Seoul. Market rumors also circulated that the company manufactures specialty lighting products for semiconductor facilities, although no such products are listed in its business portfolio.
Tire maker Kumho Tire, now a subsidiary of China's Doublestar, also surged 11.38 percent Friday on speculation that its Gwangju plant site could be sold for a semiconductor project.
Bohae Brewery, based in South Jeolla’s Mokpo and running a brewery in Jangseong County in the province, on Wednesday saw its share price jump 29.93 percent. The price dropped 30 percent and 15.91 percent in the following days, largely on a belief the brewery’s connection to the chip cluster plan is far-fetched.
“Most of the companies that saw a stock value hike because of the excitement surrounding the Gwangju chip cluster plan are minor players in the country’s stock market,” a market analyst said. “They jumped in the market instantly thanks to private investors. But their deflation will come just as easy. The chip cluster plan will mostly help listed chip makers but even that will take a while from now to see it happening.”