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Stock value of exporters rises in first half

But companies that only operate in the local market see losses
July 11,2017
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The stock value of companies that heavily concentrate on exports, especially those shipping out IT products, has gone up largely in the first half thanks to the strong recovery of Korea’s exports.

In contrast, the stock values of businesses that target the domestic market have suffered losses. This was largely because the domestic economy continued to remain stagnant.

Cosmetics companies, which enjoyed a bullish rally a year ago, have also seen their stock value decline in the first half.

According to the Korea Exchange, SK Hynix saw its market capitalization surge 45.4 percent from 33.3 trillion won ($29 million) at the beginning of the year to 48.5 trillion won as of Friday last week. LG Electronics’ market capitalization also increased 43.2 percent from 8.4 trillion won to 12.9 trillion won during the same period.

Samsung Electronics saw its market capitalization increase 23.1 percent from 254 trillion won to 312.7 trillion won. It was the first time that a Korean company’s market capitalization has exceeded 300 trillion won.

Posco, the country’s leading steel manufacturer and exporter, saw its market capitalization increase 13.6 percent to 25.8 trillion won from the beginning of the year.

The stock values of these companies have risen in line with the nation’s export growth.

According to the Ministry of Trade, Industry and Energy, in the first half of this year exports of semiconductor chips has risen 49.5 percent compared to the same period last year. Petrochemical exports rose 27.6 percent and steel products increased 16 percent. Display exports rose 15.5 percent.

However, Hyundai Motor didn’t enjoy the rally that other exporters experienced as its outbound shipments suffered in the first half. Its market capitalization has only gained 1 percent so far this year.

Experts said the stock value of exporters grew as expectations on the improving export market rose.

And that momentum is expected to continue in the second half.

“Considering that the economic indicators in the U.S. and China are showing favorable signs and the raw material prices are believed to have hit the bottom, exports will likely continue their improvement in the third quarter,” said Kim Moon-il, an analyst at HMC Investment & Securities.

While exports have been improving, the situation is not the same for the domestic market.

GS Retail’s market capitalization was 3.62 trillion won at the beginning of the year, and only rose 5.3 percent to 3.81 trillion won as of July 7.

Nongshim, a major food and beverage company, saw its market capitalization drop 1.1 percent during the same period. CJ CheilJedang also saw its market capitalization decline, falling 0.51 percent in the same period.

This is a stark contrast to the 17.5 percent increase that the main bourse Kospi has enjoyed since the beginning of the year.

The leading Korean cosmetics company AmorePacific saw its market capitalization shrink 5.7 percent.

Lotte Shopping was able to avoid a fall in share values as Lotte Group is pushing for a change in its governance structure by turning into a holding company.

Yoon chang-yong, chief economist at Shinhan Investment, said exporters are increasing the relocation of their productions plants overseas due to rising labor and logistic costs as well as the deepening trade protectionism in the global market.

“[Such moves] will weaken the connection between exports and the domestic market that will become the cause to the structural stagnation of the domestic economy,” Yoon said.

According to Lim Young-ju, head researcher at Heungkuk Securities, the new government’s economic policy will play a significant role in the second half.

“The securing of jobs through the government budget, the soft landing of household debts and the real estate market will be determining factors for mid-to-long term [Korean] consumption,” Lim said.


BY CHO HYUN-SOOK [lee.hojeong@joongang.co.kr]