Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Korean bio stocks plunging as large-cap players mired in unceasing scandals
Retail investors of SillaJen protest in front of the Korea Exchange in Seoul on Jan. 18, calling for the resumption of its stock trading. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Korea's biotech stocks are facing widening uncertainty amid weakening investor sentiment due to major large-cap players' involvement in a series of scandals.
According to data from the Korea Exchange, the profitability of KODEX bio exchange-traded funds (ETF) dropped by 16.49 percent on Jan. 20, compared to the beginning of the year. This was attributable to the stock fall of the scandal-tainted bio and healthcare companies ― such as Osstem Implant, SillaJen and Celltrion.
Osstem shares have been suspended from trading since the start of this year, after one of its employees allegedly embezzled 220 billion won. It remains to be seen whether the exchange operator will resume the trading of its shares, but even if trading is resumed, Osstem's corporate value will likely plummet after losing trust from investors due to its poor internal supervision system.
Last week, the Korea Exchange also decided to delist drugmaker SillaJen from the secondary Kosdaq. About 170,000 retail investors cried foul over the exchange's decision.
Even if the decision is confirmed next month, it has ended up weakening investor sentiment on biotech stocks here. The company was the second-most valuable company in the secondary stock market, with a market capitalization of around 7 trillion won back in 2017. But with its management indicted on embezzlement charges, SillaJen shares have been suspended from trading since May 2020.
Market analysts said bio stocks will face a bumpy road ahead this year amid planned rate hikes from the U.S. Federal Reserve and the Bank of Korea. Bio stocks had been enjoying a strong rally after the start of the coronavirus pandemic in early 2020, but failed to extend the growth momentum last year due to weak exports.
“The rate hikes come as a risk to growth stocks represented by ones in the pharmaceutical and biotech industry,” SK Securities analyst Lee Tae-mi said. “As the interest hikes will continue throughout 2022, the monetary issue will pose a negative impact on the sector, but investor sentiment will recover if uncertainties on the rate hikes and other issues are cleared away.”