Korean stock market investors experienced broad-based declines through July 24 as 96% of listed companies underperformed the KOSPI index according to financial data provider F&N Guide. The KOSPI fell 26.59% from its June 22 peak of 9114.55 through July 24, with 1,770 stocks declining during this period. KB Securities analyst Kim Min-gyu stated that indiscriminate selling created opportunities for value investors to identify fundamentally strong companies trading at depressed valuations.
KOSPI Performance Shows 96% of Listed Companies Underperformed Index
Among 2,626 total listed companies, only 94 stocks recorded returns exceeding KOSPI's 216.28% gain through June 22 when the index reached its closing high of 9114.55, according to F&N Guide data released on the 27th. Compared to year-end levels, KOSPI rose 58.76%, but only 103 stocks surpassed this return, meaning 96.08% of all stocks underperformed the index.
The KOSDAQ market showed more severe declines. The KOSDAQ index fell 19.15% through July 24 this year. After reaching a closing peak of 1226.18 on April 27, the index dropped 38.98% over approximately three months. It declined 21.02% through June 20 during KOSPI's rally period, then fell an additional 22.74% during KOSPI's correction phase.
Kim Min-gyu of KB Securities stated that while broad market declines may discourage buying, the current environment presents rare opportunities for long-term value investors to find undervalued stocks. He noted that indiscriminate selling likely pushed some fundamentally sound companies to excessive price levels.
F&N Guide Identifies 32 Stocks with Profit Growth and Low PBR
Using F&N Guide's DataGuide service, 32 stocks were identified meeting specific criteria: year-over-year net profit increases in both last year and Q1 this year with projected growth exceeding 10% for this year; price-to-book ratio (PBR) below the six-year average (2020-2025) as of July 24 closing price; and stock price performance from June 22 to July 24 better than KOSPI's -26.59% decline.
Kim identified three characteristics of stocks with potential to recover when investor sentiment improves: profit increases in last year and Q1 this year, low valuation relative to earnings, and relatively less severe declines during the recent selloff.
Pharmaceutical and Retail Stocks Show Strong Earnings Growth
Pharmaceutical and bio stocks occupied five positions among the identified stocks, including Celltrion, Hanmi Pharm, Hugel, ST Pharm, and HK Inno.N.
Celltrion showed the highest consensus earnings growth rate among pharmaceutical stocks, with projected net profit growth of 46.54% this year compared to last year. Its PBR based on Q1 capital and July 24 closing price stood at 2.32 times. The stock price rose 5.4% during the correction period after June 22.
Convenience store operators GS Retail and BGF Retail were both selected as undervalued profit-growth stocks. Q1 net profit surged 783.59% year-over-year for GS Retail and 119.24% for BGF Retail, reflecting the effects of continued store efficiency improvements through last year. Current PBR stands at 0.66 times for GS Retail and 1.68 times for BGF Retail.
Nongshim's PBR of 0.76 times remained below 1.0. Q1 net profit increased 16.33% year-over-year, with annual growth projected at 14.33% for this year.
Consumer goods stocks identified as value plays included F&F and Hanssem (fashion) and Kolmar Korea (cosmetics).
SK's selection as an undervalued stock drew attention, particularly for its earnings growth rate. Year-over-year net profit growth reached 572.31% for last year and 175.89% for Q1 this year. The consensus for annual net profit growth this year stands at 593.95%, attributed to subsidiary SK Hynix's advancement in high bandwidth memory (HBM) semiconductors through SK Square.
FAQ
What percentage of Korean listed companies underperformed the KOSPI index through July 24?
According to F&N Guide data, 96.08% of all listed companies recorded returns below the KOSPI index through July 24. Only 103 out of 2,626 total listed companies surpassed KOSPI's 58.76% gain compared to year-end levels.
Which stocks showed strong earnings growth with low valuations during the market correction?
F&N Guide identified 32 stocks meeting specific criteria including profit growth and PBR below six-year averages. Pharmaceutical stocks including Celltrion, Hanmi Pharm, and Hugel were included, along with retail operators GS Retail and BGF Retail. Celltrion projected 46.54% net profit growth for this year with a PBR of 2.32 times as of July 24.
How did the KOSDAQ index perform compared to KOSPI during the correction period?
The KOSDAQ index fell 19.15% through July 24 this year. After reaching a closing peak of 1226.18 on April 27, the index dropped 38.98% over approximately three months, declining 21.02% through June 20 and falling an additional 22.74% during KOSPI's correction phase.
