Value context and insight. lkm@koreatimes.co.kr
Bio, entertainment, game shares on decline due to US monetary tightening
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By Lee Kyung-min
By Lee Kyung-min
Bio, entertainment and game shares are expected to undergo some adjustments, as tempered by monetary tightening steps by the U.S. Federal Reserve in a gradual normalization from cheap borrowing conditions long enabled by the COVID-19 pandemic.
Many of the once-soaring shares recently hit a 52-week low in the first week of January, indicating the industries with explosive growth potential associated mostly with future value creation are likely to experience a dive in prices in the near term.
Data from Korea Exchange (KRX) showed biopharmaceutical company Celltrion closed at 181,000 won ($150) on Jan. 6, and mobile game developer Netmarble closed at 112,500 won the same day, the lowest for both in 52 weeks.
Also hitting the psychologically significant mark were Krafton, the local developer of the popular game “PlayerUnknown's Battlegrounds,” and KakaoBank. The former closed at 394,500 won, Jan. 6, and the latter at 55,000 won the next day. The bank subsidiary of Kakao Corp, the country's IT giant, ended at its lowest since listing on the benchmark KOSPI.
Fifteen of the 33 junior Kosdaq-listed firms that hit 52-week lows were bio firms, including Celltrion Healthcare and Celltrion Pharm, which ended 73,500 won on Jan. 6, and 108,100 won on Jan. 7, respectively.
Market analysts say investment portfolios should be reoriented to reduce the proportion of so-called future value-oriented stocks and boost holdings of ones that can report an increase in short-term returns including telecommunications shares.
“If fears of a rise in the borrowing rate in the context of market liquidity management are to disappear, industries that are expected to register year-on-year increases in corporate profit faster than key rate hikes may stand to benefit in the near term,” Korea Standard Chartered Bank's Korea investment strategist Hong Dong-hee said.
“Whether and by how much the economy slows down should be monitored closely, with the Fed's soft-landing measures and the pace of the monetary tightening taken into account, coupled with a change in inflationary pressures in the next couple of months.”
A global move of monetary tightening, in his view, is not all bad news to the market participants, since it is more about communication with the market by the central banks. This is why he remains hopeful that there is still room for a slight uptrend in the group of said stocks.
“You could say the years of bullish runs seem likely to come to an end, if central bank rate decisions are the only factors in the market. But a slew of other variables can come into play, a reason why this group of stocks may end higher than expected,” he added.