Top 10 conglomerates take a hit

The recent torpid stock market has finally affected the biggest companies on the Seoul main bourse, with combined market capitalization of the top 10 conglomerates shrinking 5 percent since Dec. 30.

According to the Korea Exchange yesterday, the market value of the top 10 companies - including Samsung and Hyundai Motor - amounted to 693.9 trillion won ($625.5 billion) as of Feb. 12. As a result, the market value of the top 10 conglomerates has fallen 1.48 percentage points to 54.7 percent compared to the end of last year.

So far this year, Hyundai Heavy Industries, the nation’s top shipbuilder, saw the sharpest fall as its market capitalization fell more than 15 percent to 20.3 trillion won.

GS Group followed closely with a capitalization decline of more than 10 percent and LG Group slid 9.3 percent. Samsung Group this year has seen its market value retreat by 5 percent, while Hyundai Motor lost 2.5 percent.

The only conglomerate among the top 10 that saw its market value increase was Hanjin, which grew 5 percent to nearly 4 trillion won.

Hanjin Group affiliate Hanjin Transportation saw the sharpest increase in stock value (nearly 34 percent) among the leading conglomerates.

Stock of Cosmo AM&T, an affiliate of GS Group, rose 27.7 percent, followed by Hyundai Motor’s Hysco at 25.3 percent.

Cheil Industries, Samsung Group’s fashion company, saw the sharpest drop among affiliates of nearly 19 percent, followed by Hyundai Motor’s Hyundai Wia, whose stock tumbled more than 17 percent. Hyundai Heavy Industries’ shares were down nearly 17 percent.

At the beginning of the year, there was growing optimism that the stock market would thrive given that uncertainties involving the U.S. Federal Reserve’s tapering of its stimulus had finally been clarified.

Some brokerages projected the benchmark Kospi would easily surpass 2,100 in the first month alone and expand to the 2,500 level by the year’s end.

However, the Kospi so far has shown no signs that would indicate a bullish rally is in the foreseeable future.

Compared to Dec. 30, which was the last trading day of 2013, the main bourse stumbled 3.7 percent as of Friday. After losing more than 2 percent on the first day of trading Jan. 2 - falling from 2,011.34 to 1,967.19 - the market has failed to advance more than 1,970. Last week, the Kospi moved between 1,923.3 and 1,940.28.

The biggest factors boxing in the Kospi were jitters stemming from emerging markets and disappointing economic indicators from China and the United States released at the end of last month.

There are signs the situation is calming, with financial scares from Argentina, Turkey, Indonesia and other emerging markets easing since last week. There is even a growing consensus that the impact of these markets on the Korean stock market will be limited.

Although the Bank of Korea left its benchmark interest rate at 2.5 percent for the ninth consecutive month, the central bank governor suggested that emerging market uncertainties will be resolved soon.

With such renewed optimism, the market yesterday showed some improvement, but still failed to reach 1,950.

“This week we expect the market to make a mild recovery on the back of easing uncertainties in the global financial market,” said Ma Ju-ok, an economist at Kiwoom Securities.

Ma, however, noted that even so, the expansion will be limited as the market currently lacks a significant factor that would further push up indexes.

“It will be difficult for the Kospi to move beyond 1,900 and 2,100 before [Korean] companies earnings show a significant improvement,” Ma said.

The economist said the key factor will be foreign investment.

Foreigners bought loads of shares in the second half of last year, but started to sell their holdings when the U.S. Fed started to reduce its bond-buying program.

Foreigners held 418 trillion won worth of shares in December, which was 35.3 percent of Korean stocks by market value. That figure has dropped to 399.6 trillion won, or 34.9 percent.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]