The Rebellion of Marginalized Stocks

[Asia Economy Reporter Junho Hwang] 'Let's take another look at stocks that have fallen.'

This phrase perfectly describes the stock market last week. Stocks that had long been declining due to concerns over poor earnings performance showed strong gains across the board. But how long should one hold onto these oversold stocks?

Shin Seung-jin, Senior Research Fellow at Samsung Securities, pointed out on the 7th that the recent rally in neglected stocks over the past week should be seen as a short-term event. The uprising in neglected stocks last week is analyzed to be due to demand and supply factors and short-covering of short sales on long-term undervalued stocks. Stocks in this category include Kakao Pay (15.7%), Alteogen (13.8%), HLB (13.5%), and Kakao Games (13.4%).

He emphasized, "It is important to recognize that the recent price strength of neglected stocks is driven more by demand and supply factors than fundamentals," adding, "Conversely, once the demand and supply event ends, prices may be adjusted downward again."

From this perspective, Samsung Securities highlighted KB Financial Group, SK IE Technology, and Hanmi Pharmaceutical as stocks to watch this week. Regarding KB Financial Group, Shin explained, "Traditionally, bank stocks tend to move in line with market interest rates. Due to recent concerns over economic slowdown, they have shown relative weakness against rising interest rates. Despite record-high earnings, the stock price has sharply declined, resulting in a high relative valuation." He also viewed the bio sector as likely to emerge as a leading sector in the second half of the year. He judged it to be a sector with growth momentum regardless of whether the economic slowdown materializes and with relatively low concerns over earnings decline.

Additionally, Shin stated, "In the case of shipbuilding, there is a high possibility of a turnaround in the second half of the year due to rising ship prices and declining costs."