The Kospi and Kosdaq indexes are displayed on an electronic board in the dealing room at the headquarters of Hana Bank in Jung-gu, Seoul, on the 4th. The Kospi closed at 6,358.95 on the day, up 101.50 points (1.62%) from the previous session. The Kosdaq index ended at 780.72, up 43.37 points (5.88%) from the previous session, rising for a third consecutive trading day. Yonhap News
A total of 124 stocks on the Korea Exchange’s main bourse, including companies with market capitalization exceeding 1 trillion won such as SK Bioscience and EcoPro Materials, set new record lows during the recent market plunge. Small- and mid-cap stocks, which had been sidelined as funds flowed into large semiconductor stocks during the rally, were pushed down further along with the KOSPI’s decline, causing the number of stocks hitting record lows in June-August to swell to 10 times that of January-May this year.
According to the Korea Exchange on the 6th, 73 of the 943 stocks listed on the main bourse recorded all-time lows on a closing-price basis in July. This was up 37 (102.8%) from 36 in June. Based on a simple calculation using the record-low dates of currently listed stocks, this ranks as the third highest ever, following March 2020 (116) and June 1998 (76).
DKME, E-Rits Kokrep and Dongyang 2nd Preferred B, which had set record lows in July, lowered their prices again this month. As a result, 124 stocks set new record lows in the January-August period this year, equivalent to 13.1% of all KOSPI-listed stocks. While only 11 stocks hit record lows during January-May, when the KOSPI rose sharply, the figure ballooned to 113 in June-August. This means that although the KOSPI broke through to 9,000 from the 2,000-3,000 range last year, many individual stocks other than semiconductors actually lagged.
Small- and mid-cap stocks were hit particularly hard. Of the 73 stocks last month, 34, or 46.6%, had market capitalization below 100 billion won, and 52, or 71.2%, had market capitalization below 300 billion won. Typically, stocks with small market capitalization and thin trading can see their buying base weaken more quickly in absorbing sell orders during a plunge. In addition, companies with market capitalization exceeding 1 trillion won such as Netmarble, SK Bioscience, EcoPro Materials, Daehan Shipbuilding and SK IE Technology, as well as companies familiar to investors like CJ CGV, GKL, KG Mobility, Jeju Air, Socar and The Born Korea, were also on the list.
The surge in record lows is attributed to the supply-demand concentration that persisted from the upturn. As the KOSPI broke through 9,000, investor funds concentrated in large semiconductor stocks and some leading sectors, and as liquidity failed to spread across the broader market, non-leading sectors and small- and mid-cap stocks could not sufficiently keep pace with the index’s rise. Subsequently, when the KOSPI plunged to the 5,000-6,000 range, both leading and sidelined stocks were pushed down together, and their price floors collapsed all at once.
Heightened market volatility also had an impact. In June, 24 stocks hit record lows on the 26th alone, accounting for 66.7% of the monthly total. In July, after the KOSPI plunged 10.84% on the 28th, 31 stocks set new lows on the 29th and 14 on the 30th. An official at a securities firm said, “Rather than the negative factors of individual companies being reflected sequentially, the market shock simultaneously weakened the buying base of vulnerable stocks.”
The industry views that if the concentration in large semiconductor stocks eases following stricter regulations on single-stock leverage products, rotational buying could spread to small- and mid-cap stocks. However, with foreign buying concentrated in Samsung Electronics and SK hynix, and with individual investors’ sell orders likely to emerge during an index rebound, it is expected to take time for supply and demand to spread to small- and mid-cap stocks. Kim Jae-seung, a researcher at Hyundai Motor Securities, forecast that “the pace of the index’s rise will be more gradual than the bull market in May-June.”