[Asia Economy Reporter Lee Jung-yoon] The fortunes of recession stocks, which tend to perform relatively well during economic downturns, are diverging. While the stock prices of debt collection-related companies have risen due to the interest rate hike trend, traditional recession stocks such as telecommunications and mobile phone micro-payment-related stocks are weak.
According to the Korea Exchange on the 12th, Korea Credit Information closed at 13,650 won, up 13.75% compared to early last month. It rose 3.41% just the previous day. SCI Evaluation Information recorded an even steeper increase, rising 17.27% from the previous trading day to 4,685 won, which is more than a 55% increase compared to early last month. The rise in Korea Credit Information continued on the day, increasing 1.10% as of 9:07 AM.
These companies, involved in debt collection and credit investigation, have been on an upward trend as the Bank of Korea shows a policy of raising the base interest rate. This is due to expectations that borrowers’ interest burdens will increase, leading to more debtors unable to repay on due dates.
The Bank of Korea’s Monetary Policy Committee held a meeting on monetary policy direction that morning to decide whether to adjust the current base interest rate of 2.50%. A big step of a 50 basis point (1bp = 0.01 percentage point) increase is expected at this meeting, which is seen as the reason for the rise in debt collection-related stocks. Previously, the Bank of Korea raised the base interest rate four consecutive times in April, May, July, and August this year.
On the other hand, other recession stocks such as telecommunications and mobile phone micro-payment-related stocks are weak. KT recorded 33,900 won, down 2.45% from the previous trading day, and 7.50% lower than early last month. SK Telecom also fell 3.99% the previous day, dropping 7.06% over the same period. Telecommunications stocks are considered recession stocks because even when the economy worsens, communication fees are not easily reduced. Additionally, relatively high dividends attract investors during economic downturns. However, as the domestic stock market stagnates for a prolonged period, telecommunications stocks are also struggling.
KG Mobilians, a mobile phone micro-payment-related stock, closed at 5,320 won, down 6.50% the previous day, and plunged 21.53% compared to the price of 6,780 won one month ago. Mobile phone micro-payment-related stocks are classified as recession stocks because it is expected that people lacking cash will turn to micro-payments.
Researcher Heo Jae-hwan of Eugene Investment & Securities explained, "Overall, the attractiveness of stocks as an asset is declining," adding, "Debt collection-related stocks seem to be benefiting from the interest rate hike, but if the (stock market) situation worsens further, the rise is unlikely to continue."
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