A decade of changes

The stock market plays the role of economic barometer. I covered the stock market a decade ago. By coincidence, last week I examined the list of the largest stocks in terms of market capitalization. I was stunned to find so many changes in the ranking. Companies topping the list back in 2004 were mainstream exporters and IT companies or too-big-to-fail banks. Samsung Electronics was at the top, followed by SK Telecom, Posco, Kepco, Kookmin Bank (KB), KT, Hyundai Motor, LG Electronics, Samsung SDI, and Shinhan Bank. As long as the country remained an electronics and IT powerhouse, I had no doubt the ranking would stay pretty much the same.

The rising star over the last decade was Internet portal site Naver. Its stock is now worth 800,000 won ($760) a share. When its messaging unit Line goes public in Japan, the company’s worth will be over 50 trillion won, likely to threaten Hyundai Kia Motor Group’s second place on the list. That shows how times have changed in the Internet and mobile era.

But what really caught my eye was the ascension of mid-sized companies: cosmetics company Amore Pacific, confectionery companies Orion and Samlip, and apparel companies Youngone and Hanse. Ten years ago, they were domestic-oriented manufacturers that remained off investors’ radars. They were dubbed forgettable businesses.

But Amore Pacific stock trades at 2.5 million won, up 100 times its level from a decade ago. Its Sulwasoo brand hit the jackpot in China. Its combined worth with holding company Amore G. has hit 23 trillion won, the sixth largest on the local bourse.

Amore’s stock is overvalued considering a price-to-earnings ratio of over 60, observed one stock analyst. But he added: “Just imagine what would happen if the company increases its market share in China from a current 1.7 percent to 5 percent.” He predicted the cosmetics stock could be as big as bluechip Samsung Electronics, whose P/E ratio is around 6. Foreign investors hold 30 percent of the stock amid expectations for Amore’s prospects in China.

Outdoor apparel manufacturer Youngone also saw its shares jump 10 times and its market capitalization exceeds 3 trillion won. Hanse shares gained more than 10 times. Koo Jae-sang, CEO of KCLAVIS Investment Advisory, said Youngone earned a reputation for turning out quality apparel by training over 70,000 cheap laborers in Bangladesh and Southeast Asian countries. Hanse also has over 36,000 migrant workers. Nowhere in the world can companies produce quality goods paying its workers 100,000 won a month without labor conflicts. The two companies have weathered painful labor disputes and industrial slumps to gain competitive labor know-how.

Samlip has opened up the 100th Paris Baguette bakery shop in foreign markets by keeping abreast with the changing tastes of growing middle classes in markets such as China and Southeast Asia. Orion, thanks to the undying popularity of its signature product Choco Pie, saw its stock gain 15 times and is now worth over 5 trillion won. With humble packaged chocolate cakes, the company now outperforms Daewoo Shipbuilding and Marine Engineering and is chasing Samsung Heavy Industries.

Past heavyweights are falling from grace. Shipbuilding giant Hyundai Heavy Industries lost 42 percent, oil refiner SK Innovation 35 percent, and OCI Solar Power 61 percent. They have heavy competition from China, and the U.S. shale gas boom has killed new demand for oil exploitation and solar power reactors.

The economy is a dynamic organism for which life, death and evolution continue incessantly. It is meaningless to categorize manufacturers as being purely exporters or concentrating on domestic demand in a globalized world. When Amore first came up with the Sulwasoo line in 1997, it sold 500,000 products in Korea. Now Sulwasoo cosmetics are sold in China and Southeast Asia. It does not need to be a technology company to be innovative. Traditional manufacturers like Youngone and Hanse have become stock market favorites because of their labor competiveness. Cutting-edge technology is not the only technology that matters for future generations. Memory chipmakers Toshiba, Fujitsu and Panasonic are generating new revenue sources by converting their unused germ-free clean rooms into places to grow vegetables to compensate for losses in semiconductor demand. During transitional times, thinking outside the box is the best ways to ensure a creative economy. Searching for new demand and markets can be the best means to contribute to and achieve a creative economy for Korea and its future.

JoongAng Ilbo, Oct. 27, Page 30

*The author is an editorial writer of the JoongAng Ilbo.

Lee Chul-ho