By Lee Kyung-min
Shares of bank, securities and financial groups continue to underperform compared to their IT, bio and electronic goods counterparts, an inevitable result given the gradual yet irreversible reshaping of the industrial landscape and the corresponding change in stock valuation over the past few decades.
The notable poor performance in the recent strong bullish market bodes ill for the once-booming industry since its traditional business model ― receiving interest income on lent money ― will no longer be protected.
This is because their budding fintech competitors will increasingly seek to challenge what has been the easiest way to make money through offering loans at a lower rate, coupled with overall enhanced digital-oriented customer services.
Further advancing the grim outlook are planned initial public offerings (IPO) of Kakao Bank and Kakao Pay, the financial and IT subsidiaries of Kakao Corp., in the first half of the year, a major concern for traditional financial firms already losing investor funds to high-tech shares amid the COVID-19 pandemic.
The corporate culture still remains top-down, chain-of-command-based, hindering agile, innovative growth, bogged further down by hefty costs needed for digitization to compete with IT firms motivated by simpler, goal-driven objectives.
Data from Korea Exchange showed financial shares accounted for only about 7.6 percent of the benchmark KOSPI in 2021, despite the index first exceeding the symbolic 3,000-points mark, Jan. 6.
This is a drastic drop from 36.6 percent in 1989 when the index first exceeded the 1,000-point mark, a historically celebrated moment with bank shares taking three of the top four spots on the KOSPI. It was a further decrease from 19.5 percent in 2007 when the index first exceeded the 2,000-points mark.
Surging by contrast were electronics shares that account for well over a third of the KOSPI this year, up from about 17.5 percent in 2007 when Samsung Electronics topped the list.
Over a decade later, Samsung Electronics and SK hynix, Korea's top two chipmakers, still lead the market with the electronics shares total accounting for a combined 37.6 percent. Coupled with bio and IT firms that make up 11.6 percent and 7.8 percent, respectively, the three make up more than half of the KOSPI.
The recent bullish run in the stock market is expected to continue, as indicated by Samsung Electronics shares held by retail individual investors accounting for a record-high of 7 percent of the total as of Jan. 8, first outnumbering the 6.8 percent owned by institutional investors.
The all-time high figure of 7 percent was an increase from 3.6 percent in 2019, driven by individual investors' buying spree over the past few months. It is also explained by the shares total held by institutional investors declining 1.9 percentage points from 8.7 percent in the same period.
Also contributing to the Samsung share buying craze was a cancellation of mutual funds, which due to the involvement of fund managers are considered an indirect method of investment.
Data from FNGuide, a financial data service provider, showed the amount of canceled mutual funds that invested primarily in stocks was 17.4 trillion won ($15.9 billion) in 2020, and the amount of Samsung Electronics shares bought was 15.7 trillion won.
Prospects are brighter for local export firms this year, as forecast by the Bank of Korea which expects that the country will resume logging an annual trade volume of over $1 trillion for the following two years.
The central bank said Korea is expected to report $550 billion in exports, up 8.5 percent from 2020, whereas the figure for imports is expected to be $508 billion, up 9.5 percent year-on-year. Data from the trade ministry showed the country's export volume stood at $512.8 billion in 2020, down 5.4 percent from 2019.