Calm Kospi hides turmoil as Q1 reports approach

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Calm Kospi hides turmoil as Q1 reports approach


The stock market has been relatively calm lately, with the benchmark Kospi showing few signs of volatility or uncertainty.

The market on Thursday closed 0.25 percent or 6.12 points higher than the previous day, while on Friday it closed the week slipping 0.39 percent or 9.77 points.

But the figures for individual shares tell a different story. The IT industry has been enjoying a bullish rally led by semiconductors lately, while biopharmaceutical shares have been struggling.

The upswing and downswings of these shares have been heavily affected by expectations on first quarter performances that are starting to be released this week.

IT shares have been on the rise as their first quarter performance is expected to be better than earlier projections, while bio companies are seeing their share value fall on various controversies including the financial authorities raising concerns on biopharmaceutical companies’ accounting practices that counts R&D costs as intangible assets.

Samsung Electronics, the market bellwether, recently enjoyed its share value recovered to the 2.6 million won range.

Although the company’s share price fell to close at 2,581,000 won ($2,413) on Friday after losing 2.20 percent, on Thursday it closed at 2,639,000 won. The last time it was above 2.6 million won was on Jan. 8.

Although this is less than last year when the company’s shares were traded around 2.8 million won, it is still considered a recovery from the beginning of the year.

SK Hynix, another major semiconductor company, has been enjoying a bullish rally recently.

Although it closed 3.98 percent lower on Friday, on Thursday it gained 3.9 percent to close at 87,900 won.

“Between the end of last year and earlier this year there were favorable views on the semiconductor market, but share values started to fall as there were growing concerns that the situation could turn around and related chip manufacturer performances could be less,” said Park Yoo-ak, an analyst at Kiwoom Securities. “However, such concerns have been eased as some of the performance reports turned out to be better than expected, and this helped share the value [of semiconductor companies] to recover.”

Samsung Electronics on April 6 estimated its first quarter operating profit to reach a new quarterly record of 15.6 trillion won in its guidance report. This was 1 trillion won more than the market projected. The estimated profit has led to higher expectations for the company’s second quarter performance.

But other industries are struggling to live up to last year’s performance.

A recent Daishin Securities report revealed that the overall net profit of listed companies on the Kospi actually shrank in the first quarter, the first time this has happened in more than two years.

“It’s projected that the net profit increase [made from the stock market] in the first and second quarter is unlikely to reach last year’s level,” said Cho Seung-bin, a Daishin Securities analyst. “Additionally, the Korean government raising the corporate tax, unlike other countries like the United States, is also lowering the investment attractiveness [of Korean shares].”

The analyst said that poor performance in the first half could drive investors away, leading to worse performance in the second half.

“If the performances in the first half turn out unfavorable, expectations could further fall in the second half,” Cho said. “That’s why we need to closely look at the performance reports.”

The biopharmaceutical industry, which led the Kospi and Kosdaq in terms of market growth last year, seems to be suffering the most from a lack of investor confidence.

Biopharmaceutical shares on Friday were mixed. Celltrion, the fifth-largest by market cap on the Kospi, closed 0.94 percent higher than a day earlier, but the turnaround came after three consecutive days of decline. On Thursday, the company’s share fell sharply, losing 6.33 percent.

Samsung Biologics, the sixth-largest market cap on the Kospi, continued a losing streak that has continued for five consecutive trading days. Other biopharmaceutical shares have been tumbling, with SillaJen, which was hugely popular among investors largely, seeing its share price drop for three consecutive days. Cha Biotech and Nature Cell, on the other hand, turned around from 8 and 9 percent drops the previous day.

The biopharmaceutical industry has been plagued with negative news recently including new drug development being halted and authority approvals being denied. Some brokerage studies have even warned investors the industry is currently in a bubble, causing more instability in biopharmaceutical shares.

The situation could get worse when first quarter reports come out.

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