Small-Caps Starting To Make Big Noises

Many small-capitalized stocks are rallying amid slowing gains in the local stock market, as individual retail investors are snapping them up.

The index that tracks the movement of small-cap issues, with capital of less than 35 billion won ($27.2 million), outperformed the Korea Composite Stock Price Index by 8.3 percent this year through Tuesday, compared with a 2.6 percent gains in large-caps with more than 75 billion won in capital and a 15.9 percent fall in mid-caps againt the benchmark index.

Notably, small-caps have staged a steep rise since May 23, while large and medium stocks declined. Many small-cap names are seen on a list of best perfomers since May 1. Share prices of Hyundae Paint Ind. Co. and Hunex, a construction material and toy distributor, have more than doubled since May 1. Shefline Corp., a stainless steel cookware maker, and Peeres have gained more than 80 percent, as did Dong Yang Steel Pipe Co., Kwang Duk Moolsan Co., Haitai Store Co. and UniChem.

The percentage of small-caps in total trading rose to 28 percent Tuesday from 19 percent early this year. During the same period, that of large stocks fell to 63 percent from 74 percent, while that of mid-caps rose by just 1 percentage point to 9 percent.

Still, foreign and local institutional investors are not interested in the small fry.

Just two - Cheil Communications and LG Ad - were among the 20 stocks most heavily purchased by overseas investors, and Samsung Fire & Marine Insurance Co. was the only on the list bought by institutional players.

"Every time the stock market corrects, small stocks gain strength due to heavy trading by individual investors," said Oh Hyun-seok, a senior analyst at Hyundai Securities Co. "But most of them will not maintain the momentum because they are not supported by strong fundamentals."

by Chung Jae-hong