KOSPI Over 10 Years... 'Healthcare & IT' Rise While 'Shipbuilding & Construction' Decline

Industry Trends Revealed Through the Top 100 Market Capitalization Companies of the Federation of Korean Industries

[Asia Economy Reporter Changhwan Lee] Over the past decade, companies in the ‘Healthcare’ and ‘Information Technology (IT)’ sectors have rapidly emerged in the domestic securities market, while the share of traditional core industries such as shipbuilding and construction (‘Industrials’) has significantly declined.

The Federation of Korean Industries (FKI) announced on the 15th that an analysis of changes in the top 100 non-financial companies by market capitalization listed on the KOSPI at the end of 2000, 2010, and the third quarter of 2020 revealed these trends.

When comparing the top 100 companies by market capitalization each year by industry, the sector with the largest increase in the number of companies this year compared to 2010 was ‘Healthcare’ (2 → 12), followed by ‘Information Technology’ (8 → 15).

Conversely, ‘Industrials’ (34 → 23) and ‘Materials’ (21 → 15) saw significant decreases. ‘Healthcare’ includes pharmaceuticals and life sciences; ‘Information Technology’ covers IT-related hardware, software, and services; ‘Industrials’ encompasses machinery, construction and engineering, transportation, and aviation; and ‘Materials’ refers to chemicals, metals and mining, and building materials industries.

As of the end of the third quarter this year, the total market capitalization by industry was highest in Information Technology (592.1 trillion KRW), followed by Consumer Discretionary (160.1 trillion KRW), Healthcare (117.9 trillion KRW), and Materials (113.9 trillion KRW).

Notably, the ‘Healthcare’ sector’s market capitalization in the third quarter of this year was 36.8 times larger than at the end of 2010, showing the highest growth rate. The Information Technology sector’s market capitalization also grew 2.9 times compared to the end of 2010, and excluding Samsung Electronics, the top company by market capitalization, it was the industry with the highest total market capitalization (244.7 trillion KRW).

On the other hand, although Industrials had the largest number of companies (23) among the top 100 non-financial firms, it ranked fifth out of nine industries by market capitalization, with a market cap of 65 trillion KRW, less than half of the 161.9 trillion KRW recorded at the end of 2010. Additionally, the ‘Utilities’ sector, dominated by public enterprises with high domestic demand dependence, had the fewest companies (2) and a market capitalization (15.4 trillion KRW) that decreased compared to the end of 2000 and 2010.

An FKI official stated that this shift in capital market expectations is not only due to the rise of bio and untact (contactless) technology and product-related companies influenced by COVID-19, but also because the share of industries such as shipbuilding and heavy industries, which previously led Korea’s economic growth, has declined, and the economic structure has been reorganized around advanced manufacturing and service industries that can create high added value.

◆Top Growth Sector ‘Healthcare’, Still in Early Stages Globally

Among the top 100 global healthcare companies by market capitalization as of the third quarter of 2020 (based on S&P Capital IQ), two Korean companies were included: ‘Samsung Biologics’ (51st) and ‘Celltrion’ (65th).

The United States had the most companies with 51, including ‘Johnson & Johnson’, ‘Merck’, ‘Pfizer’, and ‘Abbott’ (all pharmaceutical manufacturers), and ‘UnitedHealth Group’ (healthcare services). China followed with 15 companies such as ‘Hengrui Medicine’ (pharmaceutical manufacturing) and ‘Mindray’ (medical devices). Japan also had 11 companies on the list, including ‘Chugai’ and ‘Daiichi Sankyo’ (both pharmaceutical manufacturers).

In terms of total market capitalization of the healthcare sector, the U.S. (4,625 trillion KRW) was 58 times larger than Korea (80 trillion KRW), China (555 trillion KRW) was 7 times larger, and Japan (495 trillion KRW) was 6 times larger.

The gap widened further when comparing sales figures for the first half of 2020. The 51 U.S. companies achieved approximately 705 times the sales of the two Korean companies, while China and Japan recorded sales 11 times and 9 times higher, respectively. Meanwhile, Australia had only one company, ‘CSL’, included in the global top 100, which posted nearly four times the combined sales of the two Korean companies in the first half of this year.

Yoo Hwan-ik, Director of Corporate Policy at FKI, said, “Comparing the KOSPI market now with 10 or 20 years ago clearly shows capital flow movements aligned with the changing economic structure and industrial ecosystem shifts,” adding, “It is important to prepare customized industrial policies in response to industrial changes.”

This content was produced with the assistance of AI translation services.