Large Conglomerate Stocks Stumble Amid Foreign Sell-Off... Market Cap of Top 7 Groups Plunges by 143 Trillion Won

Market Cap of Top 7 Conglomerates Shrinks, Except Hyundai Motor
"Mean Reversion: Capital Flow Shifts from Large Caps to Mid- and Small-Caps"

Recently, as the KOSPI has repeatedly fluctuated around the 4,000 mark in a fierce battle for higher ground, it has been revealed that the market capitalization of major conglomerate stocks that led the rally has evaporated by more than 140 trillion won. Analysts say that as foreign investors, who had driven stock price increases, are withdrawing, the concentration of funds in large-cap stocks is undergoing mean reversion, spreading toward mid- and small-cap stocks.

According to the Korea Exchange on December 18, as of the previous day's closing price, the market capitalization of Samsung Group stood at approximately 919 trillion won (excluding preferred shares), down 21 trillion won from about 940 trillion won on November 3, when the KOSPI hit its all-time high (based on closing price). As recently as October, Samsung Electronics, the flagship of the group, and SK Hynix, the "two pillars" of semiconductors, together surpassed a combined market capitalization of 1,000 trillion won, but the group's overall "Scaling Up" appears to have stalled.

Samsung Group is not the only one that has shrunk in size over the past month. During the same period, SK's market capitalization fell by about 50 trillion won from 570 trillion won to 520 trillion won, while LG, which had outpaced Hyundai Motor in the race for 200 trillion won in market capitalization last month, also contracted from 197 trillion won to 182 trillion won. In addition, HD Hyundai (168 trillion won to 146 trillion won), Hanwha (132 trillion won to 109 trillion won), and Doosan (89 trillion won to 76 trillion won) were among the top seven conglomerates whose combined market capitalization losses reached 143 trillion won in just one month.

This instability among large-cap stocks is attributed to foreign investor outflows. Foreign investors, who had driven the KOSPI rally by focusing on large-cap stocks, began realizing significant profits, putting downward pressure on stock prices. Since last month, foreign investors have been net sellers of 15.8 trillion won in the KOSPI market alone, with particularly heavy selling in major conglomerate stocks such as SK Hynix (9.576 trillion won), Samsung Electronics (2.58 trillion won), and Doosan Enerbility (1.038 trillion won). Among the top 10 net-sold stocks, seven are from major conglomerates.

Securities analysts interpret this phenomenon as a normalization of the previous concentration in large-cap stocks. Kim Minkyu, a researcher at KB Securities, said, "The upward momentum that was concentrated in mega-cap stocks is now undergoing mean reversion, spreading to low-valuation stocks and mid- and small-cap stocks. The performance gap between large-cap and mid- and small-cap stocks, which had widened to 26.4 percentage points compared to 60 days prior at the beginning of last month, has recently narrowed to 14.8 percentage points, and there is still room for further reduction."

However, the fact that KOSPI operating profit and net income have been steadily revised upward since the third quarter is expected to provide positive momentum for large-cap stocks. According to Eugene Investment & Securities, KOSPI operating profit for the fourth quarter of this year is estimated at 78.3 trillion won (up 63.8% year-on-year), and net income is projected at 56.2 trillion won (up 126.2%).

Kim Suyeon, a researcher at Hanwha Investment & Securities, said, "Although the KOSPI started this year at 2,400 and rose to 4,000, 29% of stocks have actually fallen compared to the beginning of the year. This is because the economic rebound has been limited to certain sectors such as artificial intelligence (AI) and bio industries, rather than being broad-based." She emphasized, "To find stocks that could rise 100-fold in the future, investors should pay attention to companies that, like HD Hyundai Electric in 2020, are currently at the bottom of their business cycle and have the potential for a turnaround in performance going forward."