Fallen Joseon Stocks... When Will They Rise?

Due to COVID-19, stock prices are still bottoming out... No recovery compared to the beginning of the year

LNG carrier built by Samsung Heavy Industries (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] Shipbuilding stocks are still hitting bottom due to the novel coronavirus disease (COVID-19).

According to the Korea Exchange on the 3rd, the closing price of Korea Shipbuilding & Offshore Engineering was 79,600 KRW the previous day. Compared to 95,900 KRW recorded on August 14, it has fallen 17% in two and a half months. During the same period, Hyundai Mipo Dockyard dropped 13.86% from 33,550 KRW to 28,900 KRW, Samsung Heavy Industries fell 12% from 5,750 KRW to 5,060 KRW, and Daewoo Shipbuilding & Marine Engineering declined 16.57% from 25,650 KRW to 21,400 KRW.

Shipbuilding stocks have been unable to escape the impact of COVID-19. The offshore plant market shrank sharply due to the plunge in international oil prices, and new orders this year were sluggish. The super boom in the liquefied natural gas (LNG) carrier market, which had been a pillar, also saw delays in major projects. The decline in the won-dollar exchange rate is another factor hindering sales growth. Comparing stock prices with those at the beginning of the year before COVID-19 spread worldwide, Korea Shipbuilding & Offshore Engineering fell 36.57%, Hyundai Mipo Dockyard 35.63%, Samsung Heavy Industries 29.92%, and Daewoo Shipbuilding & Marine Engineering 21.76%, showing no signs of recovery.

Jung Dong-ik, a researcher at KB Securities, said, "The impact of COVID-19 was expected to gradually ease from the second quarter of this year, but concerns are growing as it has resurged mainly in major advanced countries such as Europe and the United States in the fourth quarter." He added, "Given the domestic and international conditions surrounding the shipbuilding industry, it is expected to be difficult to expect meaningful improvement at least until the first half of next year, so a conservative approach is judged to be necessary." Global new ship orders next year are expected to increase due to economic recovery following COVID-19 stabilization, but the intensity is expected to be limited.

Among shipbuilding stocks, Korea Shipbuilding & Offshore Engineering is showing a noticeable move. Through a disclosure, Korea Shipbuilding & Offshore Engineering lowered its order target for this year by 33%. Han Young-su, a researcher at Samsung Securities, explained, "This year's sluggish orders are a common problem across the entire shipbuilding industry, and investors were already aware of this, so there is no need to interpret it negatively." He added, "Rather, attention should be paid to the fact that to achieve the new target, orders in the fourth quarter alone must be 1.4 times the orders of the first to third quarters." The previous day, Korea Shipbuilding & Offshore Engineering announced that it succeeded in securing orders for two LNG carriers. Compared to competitors, Korea Shipbuilding & Offshore Engineering has a relatively low dependence on offshore plants, which is advantageous in a low oil price situation.

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