KRX Steel and Bank Indexes Rise... "Increased Interest in COVID-19 Impacted Stocks"
Bio and Secondary Battery ETFs Weak, Commodity and Energy ETFs Strong
[Asia Economy Reporter Minji Lee] As concerns over inflation have caused U.S. Treasury yields to rise sharply, investment sentiment toward steel and banking sectors has significantly expanded.
According to the Korea Exchange on the 28th, the sector index with the highest growth rate this month was the KRX Steel Index. Composed of 10 steel stocks, the KRX Steel Index rose 9.87% from 1385.70 to 1522.49 as of the 26th. During the same period, the KOSPI increased by only 1.23%. Steel stocks, considered cyclical, appear to be on an upward trend in line with the sharp rise in raw material prices such as copper.
Posco, which holds the largest market capitalization weight of 56.6% in the index, rose about 14.6% this month. Poongsan increased 28.4% during the same period due to higher profit expectations driven by strong copper prices. The copper price, used as a leading economic activity indicator, is expected to surpass the all-time high of $10,000, which is believed to have significantly boosted stock prices. Other stocks such as Young Poong (20%), SeAH Besteel (20%), Korea Steel (17%), Dongkuk Steel (16%), and KG Dongbu Steel (12%) also rose.
Junho Byun, a researcher at Heungkuk Securities, explained, “The market is betting that COVID-19 can be controlled,” adding, “Interest in cyclical stocks that have not yet risen much and COVID-19-affected stocks is expected to continue expanding.”
The KRX Bank Index, composed of eight financial holding and banking stocks, also rose 9.5% from 572.37 to 626.73. Hana Financial Group increased 13.4%, JB Financial Group 12.5%, DGB Financial Group 10.9%, Woori Financial Group 8.6%, KB Financial Group 8.6%, Shinhan Financial Group 7.5%, and BNK Financial Group 7.8% also saw gains.
Previously, the bank index showed a sluggish trend since the end of last year due to regulatory recommendations to reduce dividends. However, it appears to be attempting a rebound this month as net interest margin (NIM) is expected to increase with rising interest rates.
Additionally, sectors such as KRX Transportation (8.24%), Insurance (7.96%), Construction (5.12%), and Broadcasting & Telecommunications (4.23%) also recorded higher growth rates compared to the KOSPI. Meanwhile, sectors that led last month’s rally, such as Automobiles (-2.04%) and Information Technology (0.38%), showed underperformance relative to the KOSPI. The January growth rates for the KRX Automobile Index and Information Technology Index were 21.13% and 7.14%, respectively.
In the exchange-traded fund (ETF) market, investment sentiment focused on ETFs related to cyclical stocks. According to the Korea Exchange, 'KODEX Steel' rose 10.08% this month, recording the highest increase among domestic ETFs. Reflecting expectations of normalization from COVID-19, 'TIGER Travel & Leisure' (9.64%) and 'TIGER Bank' (8.78%) also showed strong performance.
On the other hand, the 'TIGER KRX Bio K-New Deal' ETF fell 10.79% this month, marking the largest decline among ETFs based on domestic stocks (excluding leveraged ETFs). Other ETFs such as 'TIGER KRX Game K-New Deal' (-6.37%) and 'TIGER KRX Secondary Battery K-New Deal' (-6.19%) also recorded weakness this month.
Among overseas ETFs, those tracking energy-related companies, such as ‘KBSTAR U.S. S&P Oil Production Companies (Synthetic H)’ (24.66%) and 'KODEX U.S. S&P Energy (Synthetic)' (23.73%), rose sharply.
Seungyeon Song, a researcher at Korea Investment & Securities, said, “As expectations for economic recovery are reflected in the market, a reflation phase is unfolding where both interest rates and prices rise, leading to continuous inflows into related ETFs,” adding, “It is time to focus on small- and mid-cap value stock ETFs that can benefit from economic recovery.”
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