Chips, cosmetics gear up for major rebound in Korean stock market

By Lee Min-hyung

Semiconductor and cosmetics stocks look to be on a path to a major rebound in the local stock market, serving as key drivers to activate the sagging KOSPI in the latter half, analysts said.

The prediction came amid diminishing global monetary uncertainties after U.S. Fed Chair Jerome Powell sent a message widely considered less hawkish than previous ones.

Korean stocks have been vulnerable to macroeconomic fears for the past few months, as well as widening volatility sparked by a series of pessimistic economic indices, such as weak exports and sluggish private consumption.

A possible rebound of major large-cap chip stocks, however, will buffer such concerns, market analysts said.

“The main bourse inched up after monetary uncertainties have been cleared away following the recent economic conference in Jackson Hole, and the once-prevalent fear sentiment that suppressed the global stock market and the KOSPI is showing signs of diminishing,” Daishin Securities analyst Lee Kyoung-min said.

“Even if there still stands a possibility of the KOSPI extending slight ups and downs, it will be on course for a stable rebound to over 2,540 points, and semiconductor stocks will be the key driving force,” the analyst said.

A gradual recovery in exports is the key reason behind the forecast, according to the expert.

“Korea's average exports this month remain sluggish, but exports for items in the IT sector ― such as semiconductors and wireless communication devices ― achieved a rebound on the daily average between Aug. 1 and Aug. 20, from a month earlier,” he said.

The Korea Customs Service releases monthly export data on the first day of each month, so if the market continues to show signs of recovery in semiconductor exports until Sept. 1, this will help the main bourse build a more favorable environment for a stable recovery in the latter half, he said.

Shares of Samsung Electronics have extended a losing streak since mid-July, hit by its weaker-than-expected earnings report, due to the prolonged negative sentiment surrounding the chip market here and abroad. After reaching this year's high of 73,600 won ($55.64) per share in the middle of last month, Samsung shares went on a downward path to around 66,000 won as of Monday.

SK hynix shares are also losing steam rapidly after reaching this year's peak of 129,000 won late last month. The second-largest chipmaker by market capitalization here has also displayed weak performance in its stock value. Shares of the SK affiliate closed at 115,900 won per share as of Monday.

Cosmetics is also another promising area for growth. Shares of more big cosmetics shares, including Amorepacific and LG Household & Health Care, extended gains, Monday, amid growing hopes for sales growth driven by Chinese tourists after the country's government recently decided to resume tourism in Korea.

Amorepacific achieved gains of 3.3 percent on Monday from a day earlier. LG Household & Health Care shares also increased 2 percent during the same period.

It has been more than six years since China officially prohibited its citizens from visiting Korea on group tours, so cosmetics firms are forecast to report better earnings due to the purchasing power of Chinese tourists.

“Elderly group tourists will take up a significant portion, and they will focus more on buying somewhat expensive cosmetics products launched by the two companies,” KB Securities analyst Park Shin-ae said.

Other cosmetics firms have also achieved a robust stock rally amid foreign investors' strong buying spree. Shares of Cosmax, a beauty product maker whose market cap hovers around 1.6 trillion won, has reported surprising growth of more than 44 percent between Aug. 1 and Aug. 28 on foreign capital influx. Foreigner investors purchased Cosmax shares worth 37.7 billion won in the past two weeks.