In recent months, South Korean tech stocks have skyrocketed compared to other tech stocks. This year alone, the stores have seen an increase of as much as 1,200%.
While this surge in investments has caused a lot of enthusiasm in the markets, the question remains – will the rally have enough staying power?
In this article, we will explore this topic further.
Overview of the Korea Stock Exchange
The Korea Stock Exchange (KSE) is South Korea’s primary stock exchange and one of the largest in Asia. The KSE was founded in 1956 and is located in downtown Seoul, alongside a number of other exchanges, including KOSDAQ and the junior board KONEX. It serves as a venue for buying shares and trading securities from companies listed on its two markets, the main index KOSPI Market, comprising some 550 stocks, and the secondary index Kosdaq Market, for tech and startup companies.
The South Korean market has seen a surge in activity since 2019 and has become known as one of the fastest-growing markets globally. This has been driven by strong gains in 2020 led by tech companies like Samsung Electronics Co., SK Hynix Inc., Amorepacific Corp., Naver Corp., Kakao Corp., and Hyundai Motor Group. These star names have pushed the KOSPI to a record high at more than 2,400 points, with year-to-date gains approaching 43%.
However, some analysts remain concerned that this rapid growth may not be sustainable since most of these stocks already appear to be expensively priced after enormous appreciation over the past year – more than 1,200% for some of these tech stocks. So while these powerful tech names may remain able to drive returns, there’s also a need for smaller or less well-known companies to participate if sustainable growth is to be achieved over time at the KSE.
Overview of the tech stocks
Korean tech stocks have recently experienced a surge of investor attention and market success. The names range from social media companies to electric vehicle makers, and they have seen their stock prices soar by more than 1,200 percent over the last 12 months. This has drawn a lot of media scrutiny and raised questions about the sustainability of these gains.
South Korea’s tech sector is dominated by two big names: Naver Corp., owner of the country’s largest search engine, and Kakao Corp., which owns a chat-based platform, Kakao Talk. Both companies are listed on the benchmark KOSPI index and have seen their share prices soar over the past year. Other key players include KT&G Corp., South Korea’s largest cigarette manufacturer, which has transitioned into e-commerce in recent years, and SK Telecom Co., South Korea’s largest mobile carrier, a leader in 5G technology services.
The popularity of these companies is driven largely by their standing as leaders in new technologies such as artificial intelligence, autonomous driving, robotics, and blockchain in South Korea.
History
South Korea has seen a surge in technology stocks in recent years, with some leading indexes up over 1,200% in gains. Many of the stocks, including names like Celltrion and Hyundai Motor Co, have been in the spotlight this year, with share prices soaring and becoming some of the most popular stocks in the country.
But as with any investment, investors need to be aware of the potential risks and rewards. In this article, we’ll look at the history of Korea’s Star Tech Stocks leading up to this incredible surge in 2020.
Timeline of the tech stocks’ rally
Since early 2016, Korea’s “twin engines of growth,” tech stocks Kakao Corp. and Naver Corp., have surged beyond expectations, leaving other markets in their wake and gaining more than 1,200 percent. As domestic investors take advantage of the gains with local indices sitting near all-time highs, there are some doubts about whether the rally can last as much as it has been enjoyed in the past few years.
Here’s a timeline of the rise and stay of these stocks at record highs:
-February 2016: Kakao and Naver stocks rose 6 percent annually between 2012 to 2015.
-January 2017: Kakao was up 206 percent on year while Naver surged by 185 percent within three months of the new year 2017.
-May 2018: Both stocks posted record closing highs with nearly 540 percent surge by Kakao and around 370 percent by Naver over two years since January 2017.
-September 2020: Despite numerous external uncertainties that may have affected people’s optimism towards both stocks (such as COVID-19 pandemic), both companies recorded more than 1,200% increase since February 2016; Kakao hit an all times high on August 21st 2020 with a closing price at 477480 won per share after a 26 percent surge from January 2021; likewise, Naver continued down its own path to an all time high on September 24th with a closing shareprice at 496560 won after experiencing 10 straight sessions of gains since mid August 2020.
-October 2020: Both companies’ stock prices steadied out after setting record highs earlier this month.
Factors driving the rally
Several factors are thought to have contributed to the incredible 1,200 percent rally of Korea’s star tech stocks in 2020. Demand for IT-related services has been on the rise in Korea due to increased digitalization of services, government incentives, and relaxed regulations, as well as strong interest from domestic and overseas investors in tech stocks.
Government initiatives, such as the ‘Public Safety Wireless Network’ (PSWN) project, have supported investments in data center and telecom infrastructure construction, which bolstered the growth of technology companies in Korea. The Korean government also removed regulatory barriers by lifting a ban on foreign ownership of certain communication companies and allowing them to trade their shares publicly.
In addition, many foreign institutional investors are bullish on new technology companies based in South Korea such as Naver Corp., Kakao Corp., so much so that they have been investing actively in them since 2017. This attraction from foreign investors has propelled even further this rally of star tech stocks in 2020.
Finally, most notably for market movement is retail participation—dominated by millennials and Gen Z who actively seek higher return assets over traditional savings products and are tech-savvy enough to understand investments opportunities amid an era of extreme volatility triggered by news headlines from Brexit negotiations and U.S.-China trade tensions. Therefore retail investor participation could be a key driving force behind the prolonged rally of Korean technologies shares over a short period of time.
After 1,200% Rally, Korea’s Star Tech Stocks Need Staying Power
Korea’s Star Tech stocks have been on a tear in the past year, with a gain of over 1,200 percent across the board. As investors wonder how much further these stocks will go and whether they can maintain their remarkable gains, it is important to analyze the fundamentals of these stocks and assess their staying power.
In this article, we will take a closer look at the performance of Korea’s Star Tech stocks, analyzing the factors driving their rise and their potential for growth in the future.
Comparison of the tech stocks’ performance
South Korea has experienced a 1,200% rally in tech stocks over the last year, making them some of the world’s most valuable. Shares of internet giant Naver Corporation and the mobile messenger operator Kakao Corporation have gained as much as 951.9% and 1,571.7%, respectively since March 2020. These gains have also propelled other internet-based services companies to new heights in terms of market capitalization, with Naver’s at around 100 trillion won (US$87 billion) and those of Daum Kakao at 36 trillion won (US$30 billion).
Overall, the performance of these stocks has been impressive lately with eye-catching returns achieved in a short amount of time. While our stock analysis has revealed that these tech stocks can continue to maintain their good performance over time for investors interested in long term investments, there are risks involved with such investing strategies that need to be carefully evaluated.
Naver’s share price is up 84%, Kohana’s is up 117%, Celltrion’s share price is up 217%, Nexon’s is up 98%, The Marvelous Co.’s share price has surged 134% while Hana Financial Group’s stock has increased 76%. Comparing them against one another shows how much potential investors could tap into if they make a well-informed decision regarding which company stock to purchase—notably due to each platform having its own unique user base and different levels of brand loyalty. Although the upside potential for these companies could be desirable for investors interested in longer term investments due to its considerable returns over this short period, certain downsides should be taken into account before jumping on board with any particular stock.
Potential risks of investing in tech stocks
Technology stocks, such as those of Korea’s star tech companies, have enjoyed tremendous gains in recent years. But potential investors should be aware that these gains come with certain risks.
First, the success of many tech stocks has been linked to the growth of the global technology sector which itself is very susceptible to boom and bust cycles. In other words, even high-performing tech stocks could suddenly experience considerable losses in a very short time frame as consumer tastes and preferences shift toward other new technologies.
Likewise, many tech stocks are highly sensitive to changes in the regulatory environment. Regulatory changes could impose costs on companies that could make a material impact on their profitability and share prices. Finally, there is often significant competition among tech stocks which intensifies as more companies enter the fray eager to capitalize on consumer demand for new products and services – making it difficult for any single company to remain competitive over time.
In conclusion, investing in any stock carries some risk, but investing in technology stocks can come with additional risks if one is unaware of the external factors at play that can potentially diminish its value or make it unattractive to investors over time. As such, due diligence should be exercised when considering investing in these types of stocks to ensure both your understanding of risk exposure and potential returns are well-supported by research.
Outlook
After a stellar 1,200% rally, the outlook for Korea’s top tech stocks remain uncertain. Tech stocks in South Korea has been performing incredibly well in the last few years, thanks to the increasing demand for cutting-edge technology from around the world. But the question remains – is this rally sustainable, or simply a short-term trend?
Let’s take a look at the outlook for these stocks.
Potential catalysts for the tech stocks
South Korean technology stocks have been on a spectacular rally in 2020, fueled by increased demand for their products and services from the pandemic’s boost in digital activity. The sector-to-date has gained 1,200%, outpacing the broader MSCI World Information Technology Index by 900 percentage points.
With this impressive performance, potential catalysts now exist for the tech stocks’ continued positive momentum. Some of these include:
• An expanded global presence – The success of South Korean internet giants such as Naver and Kakao are increasingly spreading beyond their home market and into other parts of Asia, Europe, North America and beyond. As more customers become exposed to the cutting-edge Chinese tech products and services these companies offer, it may lead to even higher demand worldwide.
• Technological superiority – South Korea has shown itself capable of quickly identifying new cutting-edge technologies before they are adopted by Western markets. This proficiency has allowed them to remain at the forefront of technological development and make continued improvements in terms of speed, cost effectiveness, interface design and so on.
• Strategic geopolitical position – South Korea’s international policy has been aggressively pro-growth since its tech industry first began booming in 2012. This strategy has meant that Korean companies have had priority access to foreign markets with improved information exchange policies amongst countries including China, Japan and the United States – all bolstering an optimistic environment for investments from abroad.
As such, these potential catalysts could continue fueling growth for Korea’s star tech stocks over the long term provided investors continue placing confidence in their potential staying power despite frequent ebbs and flows common with any equity investments.
Expected returns of the tech stocks
The rally in Korea’s tech stocks may have cooled after blistering gains in the first half of the year, but analysts are still bullish on the sector’s long-term prospects.
South Korean tech companies continue to attract investor interest owing to their solid fundamentals, steady returns and innovative products and services. This is evidenced by the MSCI Technology Index, which has seen a 1,200% rise since 2015.
Analysts are now predicting that seven of the largest South Korean technology companies – including Samsung Electronics Co Ltd, SK Hynix Inc., LG Electronics Inc., and KT Corporation – will bring a combined return of 126 trillion won ($105 billion) over five years from 2020. Over those five years, analysts say these companies will realize 5-year average estimated earnings per share growth of 10%.
In addition to shooting for aggressive return levels for shareholders through consistent innovation and improved efficiency under CEO succession plans, these tech stocks have been gaining further traction through mergers and acquisitions (M&A) activities with major global firms as many strive to expand their global presence in an effort to lead the post-pandemic recovery cycle.
While analysts remain optimistic about the future potential of these Korean tech stocks due to strong fundamentals, some experts caution that investors should be generally conservative when gauging expectations since unexpected economic shocks or geopolitical tensions could result in increased volatility or returns below original projections.
Conclusion
The stunning rally that has lifted the shares of the most popular South Korean tech stocks by more than 1,200% may be nearing its end. Even with the massive rally, valuations aren’t particularly stretched, suggesting that any pullback could be short-lived.
Still, investors should be cautious about buying in near these levels as the stock prices appear to have already factored in much of the potential upside.
Let’s take a look at the conclusion about Korea’s star tech stocks.
Summary of the analysis
A select group of South Korean technology stocks have been performance standouts in 2020. They’ve gained more than 1,200% during a volatile year and provided handsome returns to investors who got in on the ground floor. These include mobile platform Opensolution, on-demand delivery service DailyPay and software solutions company Daygosoft.
While these stocks have outperformed the South Korean benchmark KOSPI Composite Index, the big rally has left them vulnerable to a pullback if their strong fundamentals fail to remain intact. While few are arguing that Opensolution, DailyPay or Daygosoft are not worthy of investment, share prices could come under pressure as profit-taking sets in.
It is important for investors to evaluate these firms and consider making strategic investments. This will allow them to benefit from potential upside while maintaining an element of downside protection based on market conditions, news flow and macroeconomic factors outside their control. As a whole, successful investors need to be mindful that bubbles – once popped – can result in steep losses.
Recommendations for investors
With South Korean tech stocks having risen around 1,200 percent since the start of 2020, investors would be wise to understand the reasons behind the immense popularity and determine if the sector’s rapid growth is likely to stay. To that end, it is important for investors to recognize both the short-term and long-term implications from this rally in order to make well-informed decisions when considering investments in South Korea’s tech sector.
In order to assess the sustainability of this market trend, investors should analyze the technical goings-on related to the stocks themselves. Investors should pay particular attention to cash flows and price-to-earnings ratio if they are investing in individual stocks. Additionally, analyzing macroeconomic fundamentals can provide insight into how local economies may affect stock price movements over time.
It is also prudent for investors to keep a close eye on any impending changes in geopolitical dynamics that could influence tech stock prices. As with investing in any other market, it is important for potential investors in South Korea’s tech stocks seek out expert advice from financial advisors or brokers who are familiar with these stocks before investing.
Overall, there are many elements that need to be considered when assessing whether or not now (after having rushed 1,200%) is an opportune time for investors interested in South Korea’s star tech stocks. By keeping an eye out for any fluctuations within macroeconomic fundamentals or geopolitical trends and seeking out professional advice as necessary – potential investors can take measures that put them on the path towards wise decision making when it comes time for them to buy or sell these dynamic shares.
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