As the South Korean stock market continued to nosedive in October, the nation’s top 10 business groups saw more than 64 trillion won (US$56.26 billion) of their market capitalization evaporate.
According to Seoul-based market data provider FnGuide on October 23, the combined market capitalization of listed subsidiaries under the top 10 business groups came to 826.63 trillion won (US$726.71 billion) based on the closing prices a day earlier, down 64.46 trillion won (US$56.67 billion) from 891.1 trillion won (US$783.38 billion) at the end of last month.
With the domestic market remaining bearish this month, the top 10 business groups were helpless to lose their market capitalization. The benchmark KOSPI index closed 2.57 percent lower at 2,106.10 on the same day, hitting a new yearly low. The secondary KOSDAQ index plunged 3.38 percent to 719.00.
The prolonged trade war between the United States and China and the rise in U.S. interest rates created higher uncertainty in the financial market of emerging countries. Other unfavorable factors, such as the conflict between the European Union and Italy, the anxiety about lower business showings of U.S. companies and the murder of Saudi Arabian journalist Jamal Khashoggi, a critic of the government, played a part as well.
Samsung Group lost 32.41 trillion won (US$28.49 billion) of market capitalization since the beginning of the year amid tumbling stocks, marking the sharpest drop among the top 10 business groups. In particular, Samsung Electronics’ third-quarter operating profit is projected to hit a new high of 17.5 trillion won (US$15.38 billion) but its market capitalization showed the largest decrease at 18.62 trillion won (US$16.37 billion) among listed subsidiaries under the top 10 business groups. It’s the same story with other listed subsidiaries under Samsung Group. The market capitalization of Samsung BioLogics Co. and Samsung C&T Corp. went down by 5.76 trillion won (US$5.06 billion) and 2.47 trillion won (US$2.17 billion), respectively.
Hyundai Motor Group also saw its market capitalization decrease 12.14 trillion won (US$10.68 billion), mainly its key affiliates including Hyundai Motor Co. with -2.46 trillion won (US$2.16 billion) and Hyundai Mobis Co. with -3.16 trillion won (US$2.78 billion). There is concern that Hyundai Motor will not be able to recover in the near future due to a string of unfavorable factors such as weaker emerging market currencies, concerns over heavy U.S. tariffs and sluggish global sales.
There was no single business group that showed a growth in market capitalization. LG Group had the second largest drop with 7.5 trillion won (US$6.59 billion), followed by SK Group with 4.26 trillion won (US$3.74 billion), POSCO Group with 2.8 trillion won (US$2.46 billion), Hyundai Heavy Industries Group with 1.49 trillion won (US$1.31 billion), Lotte Group with 1.38 trillion won (US$1.22 billion), Hanwha Group with 1.04 trillion won (US$911.74 million), Shinsegae Group with 946.4 billion won (US$832 million) and GS Group with 499 billion won (US$438.68 million). By company, only 14 out of 98 listed companies belonging to the top 10 business groups showed an increase in market capitalization, including Hanwha Aerospace Co. with 16.14 percent, SK Materials Co. with 6.03 percent and GS Retail Co. with 4.68 percent.
The problem is that it is uncertain when the groups will be able to recover the evaporated market capitalization as the domestic stock market continued to be bearish owing to the prolonged trade war between the U.S. and China. The outlook on their performance in the third quarter is not rosy as well. The business showings of the listed subsidiaries are expected to stay still or go down, except for Samsung Electronics. Currently, the operating profit of companies listed on the KOSPI market, which have market consensus, is forecast to stand at 56.6 trillion won (US$49.76 billion) in the third quarter. Considering the fact that the disparate ratio of operating profit and consensus reached 10 percent in the past five years, however, the actual operating profit is highly likely to be fall short of the expectations. Excluding Samsung Electronics, the operating profit is expected to fall 0.8 percent compared to a year ago.