"Contact in Untact" The Rise of 'Untact' Investment as COVID Fear Fades

Domestic Online-Based Businesses Show Strength
5G Equipment Sector Leaders Gain Reflective Benefits
Convenience Food Sales Increase, Distribution Industry Responds Positively

[Asia Economy Reporter Oh Ju-yeon] As the novel coronavirus infection (COVID-19) spreads worldwide, investments focusing on the 'new normal after COVID-19' are gaining attention in the stock market. In particular, there are forecasts that the 4th Industrial Revolution will accelerate due to COVID-19, with the 'contactless (untact)' trend at its center. In overseas stock markets, the stock prices of video conferencing app 'Zoom' and online streaming company 'Netflix' are rising, while in Korea, online-based businesses and the necessary communication equipment are benefiting.

According to the financial investment industry on the 10th, the market's expectations have grown that we have entered an era based on network usage due to telecommuting and untact trends after COVID-19, and that 5th generation mobile communication (5G) services will be highlighted in the future. As of the end of last year, 5G traffic usage increased by nearly 280% compared to 4G. This means that various forms of work and daily life are likely to proceed centered on mobile. Thanks to this, companies such as KMV and RFHIC, regarded as the 'leading stocks' in the 5G equipment sector, are gaining COVID-19 windfall profits. KMV fell to 44,000 won on the 19th during last month's sharp decline, but with expectations rising as the government announced it would significantly increase investment in 5G communication networks in the first half of this year, it rose 39.8% to 61,500 won. Dasan Networks surged 78.4% from 3,755 won to 6,700 won during the same period.

Kim Hong-sik, a researcher at Hana Financial Investment, said, "The increase in traffic is increasing frequency usage and network equipment demand, accelerating early investment in 5G," adding, "As the untact-related industry develops in a new form after the spread of COVID-19, 5G equipment stocks are highly likely to become representative beneficiaries." He added, "In the long term, the three major telecommunications companies will also benefit from the increase in traffic."

With outdoor activities restricted, game stocks, online streaming-related stocks, and online education stocks have also emerged as alternative stocks in the untact era. In the U.S., online classes are conducted through Google Classroom and Zoom, which has caused Zoom's stock price to nearly double from $68 at the beginning of the year to $117. On the 23rd of last month, when the New York stock market plunged due to COVID-19, it reached an intraday high of $164. In Korea, as daycare centers, kindergartens, and elementary, middle, and high schools delayed opening, online education stocks such as Icecream Edu, MegaMD, and NE Neungyule, as well as stocks related to kids' YouTube like Samsung Publishing and Carrysoft, surged.

Due to 'social distancing' making it difficult to enter movie theaters, Netflix, which can replace movie watching at home, also experienced a special demand. Netflix fell to around $299 on the 16th of last month but rose 23.7% to the $370 range on the 9th of this month. In Korea, Jay Contentree, which has a partnership with Netflix, is considered a related stock.

Within the same industry group, the differentiated stock price increases of companies that proactively responded to the untact trend are also noticeable. Among the food and beverage sector, CJ CheilJedang, which has secured the home meal replacement (HMR) market, showed the largest increase after COVID-19. The food and beverage index fell to 2,509 on the 19th of last month but rose 31.9% to 3,310 as of the 9th of this month. Among the top market capitalization stocks, Hite Jinro rose 32.7% from 22,000 won to 29,200 won, and Ottogi rose 23.0% from 434,000 won to 534,000 won. Nongshim (17.5%) and Lotte Confectionery (27.0%) also showed double-digit rebounds.

The most prominent rebound stock was CJ CheilJedang. During the same period, its stock price surged 55.2% from 155,000 won to 240,500 won. Lee Kyung-shin, a researcher at Hi Investment & Securities, diagnosed, "CJ CheilJedang is expected to increase its first-quarter earnings due to increased demand for Hetbahn and home meal replacements caused by COVID-19."

As the gap between traditional industries and new businesses becomes more distinct due to COVID-19, it is an analysis that investors' attention is needed. Kim Yu-mi, a researcher at Kiwoom Securities, predicted, "As the flow of the digital economy strengthens further due to COVID-19, the economic structure will accelerate the transition from the old economy to the new economy."