Upcoming Virtual Reality and the Return of Past Daily Life... "Invest in Growth and Recovery" [Practical Financial Technology]

The Full Arrival of the Metaverse...Expectations for Benefits to CG and VFX-Related Stocks
Return to Normal Life After Corona...Service Consumption-Related Stocks Also Worth Attention

On the 6th, visitors are viewing the metaverse space at the '3rd 4th Industrial Revolution Festival' held at COEX in Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Minwoo Lee] As the year-end approaches, promising investment sectors are being identified as the metaverse (extended virtual world) and 'with (with) COVID-19'. The analysis suggests aiming for the 'two rabbits' of the virtual reality that will unfold in the future and the past daily life that will return by overcoming COVID-19 with vaccines.

◆Growing Interest in the Metaverse 'Booming'=Interest in the metaverse market is steadily increasing. This is due to expectations that the market growth will accelerate as various infrastructures develop. Even the markets related to virtual reality (VR) and augmented reality (AR), technologies closely related to the metaverse, are already growing rapidly. The global consulting firm PricewaterhouseCoopers (PwC) predicted that the VR·AR market size will rapidly grow from $46.4 billion (about 54.15 trillion KRW) in 2019 to $476.4 billion in 2025 and $1.5 trillion in 2030.

Recently launched metaverse exchange-traded funds (ETFs) are also attracting attention. The four metaverse ETFs listed on the 13th have all shown gains exceeding the market returns. Samsung Asset Management's 'KODEX K-Metaverse Active' rose 19.9% from the listing price to the previous day’s closing price. Mirae Asset Management's 'TIGER Fn Metaverse (17.4%)', KB Asset Management's 'KBSTAR iSelect Metaverse (13.1%)', and NH-Amundi Asset Management's 'HANARO Fn K-Metaverse MZ (10.8%)' also recorded double-digit growth rates. These significantly outperform the KOSPI's 3.6% rise during the same period.

◆Focus on Content Infrastructure for the Metaverse=The beneficiary industries of the metaverse market expansion include content production infrastructure such as computer graphics (CG), visual effects (VFX), and metaverse operation infrastructure. This is based on the judgment that as infrastructure develops, a metaverse environment capable of implementing extended reality (XR) will be established.

First, content production and platform companies are expected to benefit in the first half of next year. Competition is intensifying as domestic and international drama and film producers, including overseas online video service (OTT) companies, enter content production. Since highly competitive intellectual property (IP) cannot succeed without excellent directing, directing skills enhanced with CG and VFX have become the core of content success.

XR, an essential technology to perfectly implement and demonstrate content within the metaverse platform, is also rapidly being commercialized. Commercial technologies of extended reality platforms such as XR stages are being applied to content production. Companies like Wysiwyg Studios and Dexter are considered beneficiary industries. Kangho Oh, Senior Researcher at Shinhan Financial Investment, emphasized, "Metaverse content is being integrated into various industries such as OTT, gaming, shopping, and leisure," adding, "Interest in stocks leading innovation in metaverse content will also increase."

◆Space Industry Also Benefits=The space industry is also considered a beneficiary in metaverse infrastructure investment. In terms of communication, low Earth orbit satellite communication business is gaining attention. Low Earth orbit satellite communication is expected to play a key role in 6G wireless communication. Fast and stable data transmission is essential to enhance the realism of metaverse operations. Representative companies include Intellian Technologies and Satrec Initiative.

Moreover, the space industry is structurally bound to expand investment under the growth of big tech companies related to cloud computing, as it is an essential condition for data-based infrastructure. To secure market dominance, companies like SpaceX's Starlink and Amazon have announced their entries. The recent possibility of private sector market entry and the rapid increase in market participants for artificial satellites are also positive factors.

Byunghwa Lee, Deputy General Manager and Research Fellow at Shinhan Investment Corp., said, "With many factors such as 6G infrastructure construction and server expansion, among numerous metaverse infrastructure-related industries, 'space' with high future growth potential will lead innovation in the metaverse ecosystem," adding, "Among space companies, capable domestic satellite and infrastructure companies are expected to directly benefit."

◆Expectations for the Return to Normal Life=With the vaccination rate reaching 70%, expectations for returning to pre-COVID-19 daily life are growing. According to the COVID-19 Vaccination Response Promotion Team as of midnight the previous day, the cumulative number of fully vaccinated people reached 36,424,121. The vaccination rate is 70.9% nationwide and 82.5% among adults. The government plans to ease regulations on business facilities, large-scale events, and private gatherings in line with vaccination rates reaching 70%, 80%, and 85%.

Accordingly, recovery is expected mainly in sectors severely affected by COVID-19. In particular, service consumption, which was depressed due to restrictions on face-to-face activities, is expected to recover rapidly. The Bank of Korea's consumer sentiment survey in October this year also showed a stronger recovery outlook for spending on clothing, travel, education, culture, and entertainment compared to durable goods since August.

There is an analysis that attention should be paid to leisure industries and beneficiary stocks that continue structural growth during the transition to with-COVID-19. Especially, leisure industries that have created new terms such as 'gollini (golf + child)', 'mountain-holic', 'minimal camping', and 'chabak' (car camping) were highlighted as major fields. Accordingly, Golfzon, Chris F&C, and Gamseong Corporation were predicted as beneficiary companies. Jiyeon Son, a researcher at Shinhan Financial Investment, forecasted, "Even after with-COVID-19, platform leaders in the golf industry, including screen golf, are likely to lead the market," adding, "The establishment of the minimal camping market including chabak and the growth of a new concept outdoor clothing market led by leggings are expected to benefit ODM (Original Design Manufacturer) and SPA (Specialty retailer of Private label Apparel) companies."