Record number of IPOs scheduled for 2022 to pressure stock markets

Officials from LG Energy Solution and the Korea Exchange celebrate the listing of the battery maker on the benchmark KOSPI, at its office in Seoul on Jan. 27. Yonhap

By Lee Min-hyung

Korea's stock markets will face downward pressure, as a series of mega-sized initial public offerings (IPO) scheduled for this year is expected to weaken the growth momentum of existing large-cap stocks and widen their price volatility, analysts said Thursday.

The outlook comes at a time when the local stock market is set to attract a record amount of capital worth around 25 trillion won ($20.73 billion) through the IPOs of a group of companies, including Hyundai Oilbank, Kyobo Life Insurance and SSG.com.

LG Energy Solution, one of the most-sought-after tech stocks this year, was listed on the benchmark KOSPI in January, raising 12.8 trillion won via its much-anticipated IPO. The company became the nation's second-most-valuable company shortly after going public.

Even if the main bourse will continue attracting attention from investors with the planned IPOs, market analysts said this will not help rev up the KOSPI index.

“The market capitalization of the main bourse jumped by 11.25 percent in 2021 from the previous year, but the KOSPI index inched up only 3.63 percent during the same period, and the gap between the two was the largest since 2010,” Kiwoom Securities analyst Han Ji-young said.

But this was not the case in 2020 when the KOSPI's market capitalization surged by 34.19 percent from the previous year, while the index also soared by around 30.75 percent.

“This was because volatility widened among existing large-cap stocks due to a series of mega IPOs last year,” the analyst said. Net profits of KOSPI-listed firms did not rise as much as the growth of the total market capitalization of the main bourse, which came as a burden to the overall valuation of market players, the analyst noted.

The main bourse reached a record high of 3,300 in June 2021, but has since failed to top the mark due to growing woes over monetary tightening from the U.S. Federal Reserve. Starting this year, the index lost growth momentum, falling to around the 2,700-mark as of Thursday.

The brokerage house expects the index to fluctuate within a band of 2,580 and 2,900 this month.

Even if U.S. stocks have shown signs recently of bouncing back, it is premature to say this will last for a considerable amount of time, according to the analyst.

“The market will be shackled by policy-wise uncertainties until March when the U.S. Fed is scheduled to take concrete steps for quantitative tightening,” Han said.