Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Rate jitters, controversies, weak earnings deepen slump in Korea's biotech stocks
A stock ticker at Hana Bank headquarters in central Seoul shows Kosdaq closing at 1,084.36, down 2.41 percent from the previous session, Tuesday. Yonhap
By Park Han-sol
While the benchmark KOSPI has surged to fresh highs over the past month, powered by a semiconductor-led rally, biotech shares on the secondary Kosdaq bourse largely continue to struggle to regain momentum, industry officials said Tuesday.
Investor sentiment surrounding Korean biotech stocks appears to have weakened amid a combination of renewed rate jitters, sector-specific controversies and lackluster earnings.
The contrast has become increasingly stark in recent trading sessions, with many of the Kosdaq’s heavyweight biotech names lagging behind the broader market rebound.
Sam Chun Dang Pharm, once the bourse’s largest company by market capitalization, closed at 365,500 won ($242), Tuesday, down 2.14 percent from the previous session, according to the Korea Exchange. Other major stocks including ABL Bio, PharmaResearch, LigaChem Biosciences, Oscotec and HLB also traded lower.
Market watchers note that one of the biggest pressures weighing on the sector is the growing expectation that global interest rates could remain elevated for longer due to persistent inflation and oil-price pressures linked to Middle East tensions.
On Monday, the yield on the benchmark 10-year U.S. Treasury hovered near 4.6 percent, staying close to this year’s highs as investors scaled back expectations for Federal Reserve rate cuts.
That has particular implications for biotech firms, including those in Korea.
Because drug development requires years of costly research and clinical trials before generating meaningful profits, companies rely heavily on external funding. Rising U.S. Treasury yields tend to tighten global liquidity conditions and reduce investor appetite for high-valuation growth sectors whose earnings are expected far into the future.
“The biotech sector is highly rate-sensitive because much of its pipeline value lies far in the future, meaning it takes a long time for cash flow to materialize,” said Park Woo-yeol, an analyst at Shinhan Securities.
Still, analysts say macroeconomic pressures alone may not fully explain the weakness in the country’s biotech shares.
Investor sentiment has already been shaken by recent controversy surrounding Sam Chun Dang Pharm, whose stock soared more than 400 percent before tumbling sharply amid growing skepticism over its valuation and business outlook.
Weak earnings across the sector have added to the pressure.
Alteogen reported 71.5 billion won in consolidated revenue for the first quarter and an operating profit of 39.3 billion won, down 14.5 percent and 35.6 percent respectively from a year earlier. LigaChem Biosciences widened its operating loss to 37.4 billion won, while ABL Bio remained in the red with an operating loss of 17.2 billion won.
But some are beginning to shift their focus toward a potential policy tailwind that could help revive interest in Kosdaq-listed shares: the launch on May 22 of a government-backed fund aimed at nurturing next-generation industries.
The 150 trillion won Public Growth Fund — one of President Lee Jae Myung’s signature economic initiatives — is set to support 12 strategic sectors, including biotech, artificial intelligence and robotics.
“Under the government-led growth strategy this year, companies tied to strategic industries are likely to attract greater market attention as the Kosdaq overhaul progresses,” said Kwon Myung-jun, an analyst at Yuanta Securities.