[Weekly Market Outlook] "The Era of All Rising Together Is Over"... Entering Earnings Season

Bio, Battery, Internet, Game and other 'BBIG' related stocks lead stock market rise
Interest in Korea New Deal announcement on the 13th
"Focus on beneficiary sectors and stocks depending on detailed safety disclosure"

[Asia Economy Reporter Oh Ju-yeon] Since the outbreak of the novel coronavirus infection (COVID-19), the domestic stock market showed a sharp V-shaped rebound until early June, with many stocks rising together. However, as the second-quarter earnings announcements approach, the market trend is gradually changing. This is because differentiated rises by stock are progressing, centered on leading stocks. This trend is expected to continue into the second week of July (13-17).

According to the Korea Exchange on the 12th, among the top 10 stocks by market capitalization in the KOSPI market this month, the stock with the largest increase was Kakao, which soared to 368,000 won intraday on the 10th, setting a 52-week high. Considering the closing price of 269,500 won on the 1st of this month, it surged by 36.55%. Kakao's stock price is soaring as it benefits from non-face-to-face demand due to COVID-19 and is expected to see a significant improvement in profitability in the second quarter.

On the 29th, the KOSPI index opened at 2105.54, down 29.11 points (1.36%) from the previous trading day. Dealers are busy at work in the Hana Bank dealing room in Jung-gu, Seoul. In the foreign exchange market, the won-dollar exchange rate opened at 1205.0 won, up 4.4 won from the previous trading day. Photo by Kim Hyun-min kimhyun81@

Along with this, Naver's stock price, which was 269,000 won during the same period, rose to 308,500 won intraday on the 10th, setting a 52-week high and increasing by 14.68%, jumping ahead of Samsung Biologics to third place in market capitalization.

The securities industry analyzes that the rise of Kakao and Naver is due to changes occurring in the domestic industry.

Lee Jin-woo, a researcher at Meritz Securities, said, "The strong concentration of leading industries and the change in the stock market landscape before and after COVID-19 is the result of rapid structural changes in the industry," adding, "Such changes in the stock market landscape are appearing not only in Korea but also in major advanced countries such as Japan, Canada, the UK, and Germany."

He explained that in Japan, the landscape is changing centered on smart factories, pharmaceuticals, and games; in Canada, online platforms and gold mining companies are leading; in the UK, the focus is shifting from finance to pharmaceuticals. He also added that Germany is characterized by software industries, rather than hardware, holding market leadership.

The researcher said, "This change is not unique to us," and added, "Although it is difficult to predict, looking at past cases where 'technology' significantly changed the stock market landscape, such as 'Internet' and 'smartphones,' we can get hints about inflection points of leading stocks."

Accordingly, there is an analysis that it is necessary to pay attention to industries and stocks with continuous profit momentum not only in the second quarter but also in the second half of the year.

Choi Jae-won, a researcher at Kiwoom Securities, diagnosed, "The industries called 'BBIG (Bio, Battery, Internet, Game)' have accelerated growth potential even after the outbreak of COVID-19 as the shock from COVID-19 was limited." As a result, in a phase where overall market earnings forecasts are slowing down, attention has focused on a few stocks with profit momentum, and related stocks have led the stock market rebound.

Researcher Choi said, "The situation of high uncertainty about economic recovery until recently is likely to lead to downward revisions of corporate earnings forecasts in the second half," and predicted, "Therefore, a favorable trend is expected to continue in the second half, centered on industries such as healthcare, software, and chemicals that have profit momentum."

One of the issues to watch is the 'Korean New Deal,' which the government plans to announce on the 13th. The Korean New Deal is attracting attention as a mid- to long-term national project centered on digital and green new deals.

Labor Gil, a researcher at NH Investment & Securities, said, "Especially in the case of the Green New Deal, it is expected that beneficiary industries and stocks will be specified according to the disclosure of concrete plans," and predicted, "The concept of digital infrastructure expansion due to the Digital New Deal may influence the rise in software multiples."