The Plunge of Bio Stocks... No Bottom in Sight

[Asia Economy Reporter Hwang Junho] Bio stocks are plummeting without wings. Following the plunge of bio stocks, exchange-traded funds (ETFs) containing major stocks showed the steepest decline among all ETFs.

According to the Korea Exchange on the 6th, since the 1% decline in the KOSPI began on the 28th of last month, the ETF with the largest drop over five trading days until the 5th was Mirae Asset Management's TIGER KRX Bio K-New Deal, which fell by a staggering 14.32%.

It is even showing worse returns than leveraged ETFs. The KOSDAQ150 leveraged ETF, which tracks the 1x decline of major KOSDAQ stocks, also dropped 14.17% (NH-Amundi Asset Management, HANARO KOSDAQ150 Futures Leverage), but the decline in TIGER KRX Bio K-New Deal was even greater.

This product invests in an index created by the Korea Exchange last October to support the government's Korean New Deal comprehensive plan, focusing on major bio stocks included in the K-New Deal index. From the start, the product's returns were disappointing, drawing criticism from investors. Compared to then (October 7, 2020) and now (the 5th), it has fallen 16.20%, increasing the asset manager's concerns.

This product holds Samsung Biologics (-7.26%), Celltrion (-20.87%), and SK Bioscience (-7.98%) as core stocks (75%), all of which have plunged significantly, resulting in greater losses. Although designed to reduce the risks of direct investment, it has become a collection of only declining stocks, making the perceived losses feel even larger. Similar funds investing in comparable stocks, such as KODEX Healthcare (Samsung Asset Management, -13.84%) and TIGER Healthcare (-13.73%), are facing the same situation.

Oh Byung-yong, a researcher at Hanyang Securities, said, "The bio sector is estimated to account for about 8-9% of the KOSPI and about 30% of the KOSDAQ, but due to its nature, expectations are everything for stock prices, and the direction of stock prices depends on clinical trial results." He advised, "Although the sector performed well in the first half of this year due to expectations for COVID-19 vaccines and therapeutics last year, momentum for diagnostic kits, vaccines/therapeutics, and contract manufacturing is weakening, so it is reasonable to take a conservative view until the end of the year."