Despite Strengthened 'Social Distancing,' Untact-Related Stocks Remain Quiet

[Asia Economy Reporter Oh Ju-yeon] The non-face-to-face (untact) related stocks, which saw a sharp windfall profit during the spread of the novel coronavirus infection (COVID-19) last March, have somewhat lost their upward momentum since the beginning of this month. Although daily new COVID-19 cases have exceeded 1,000, prompting discussions of strengthened social distancing measures, untact-related stocks have rather been sidelined in the recent stock market rise.

According to the Korea Exchange on the 18th, as of 9:50 a.m., the KOSPI index rose 0.24% from the previous trading day to 2,777.17, and the KOSDAQ index increased 0.35% to 947.35, continuing the upward trend.

Despite ongoing concerns about the resurgence of COVID-19, including calls for a level 3 social distancing measure, the stocks leading the market rise on this day were contact-related stocks. Construction stocks, energy stocks that had not risen during this year's bullish market, airline stocks, and eco-friendly related stocks all surged significantly.

In contrast, untact-related stocks that benefited from the COVID-19 spread in March declined, showing a contrasting trend.

Representative untact stocks such as Kakao and NAVER fell by 0.54% and 0.88%, respectively, continuing a downward trend since breaking their August highs. Game stocks, which gained attention as people spent more time indoors, also showed weakness. NCSoft rose to the 900,000 KRW range on the 14th but then dropped back to the 870,000 KRW range, while Netmarble and Kakao Games have remained in the 120,000 KRW and 46,000 KRW ranges, respectively, for two months.

Companies like CJ CheilJedang and Ottogi, which benefited from increased demand for home-cooked meals, have also struggled during the recent stock market rise. CJ CheilJedang's stock price, which was in the 450,000 KRW range intraday on August 12, sharply dropped to 350,000 KRW on the 7th of this month, and Ottogi's price fell from the 620,000 KRW range to 550,000 KRW during the same period, hovering around this price range throughout December.

Infant content-related companies, which rose as social distancing measures made it difficult for children to attend daycare and kindergartens, have also contracted. Samsung Publishing's stock price rose from 18,900 KRW at the end of September to 27,000 KRW on the 10th of this month but recently dropped to the 24,000 KRW range. Carrysoft, which saw a brief rise in March and April, climbed to the 6,000 KRW range in May but has since remained in the 4,500 to 5,000 KRW range.

Although concerns about the resurgence of COVID-19 remain high for the time being, market participants are focusing on economic normalization next year, suggesting that attention should be paid to sectors centered on earnings.

Lee Jae-sun, a researcher at Hana Financial Investment, analyzed, "Recent domestic stock market rises have shown rotation within sectors that had not risen previously." Seo Sang-young, a researcher at Kiwoom Securities, said, "Attention should be focused on stocks expected to improve earnings. Also, since the dollar index has fallen below 90 for the first time since April 2018, and commodity prices including international oil prices have risen, expectations for foreign investors' inflows, which had been sluggish recently, are increasing, so their movements should also be closely watched."