The IPO Party Is Over... Shift Focus to Performance and ESG

IPO Performance Disappoints Compared to Expectations
Focus on Shipping, Steel, Non-Ferrous Metals with Upward Q3 Earnings Revisions
Attention on Increasing ESG ETF Assets Under Management

[Asia Economy Reporter Ji Yeon-jin] Companies that attracted attention in the initial public offering (IPO) market earlier this year have recently entered the stock market, drawing significant investor interest toward rookie stocks. However, with no major new listings expected in the near term, it is forecasted that second-half earnings and ESG (Environmental, Social, and Governance) factors will be the driving forces moving the stock market.

According to the Korea Exchange on the 11th, KakaoBank recorded a trading volume of 3.7505 trillion KRW on its first day of listing on the KOSPI market on the 6th of this month, accounting for 14% of the total trading volume of all listed companies (25.6856 trillion KRW). Over the past week, the combined trading volume of newly listed companies (Hanwha Plus No.2 SPAC, KakaoBank, PI Advanced Materials, HK Innoen, Krafton) during the last three trading days reached 14.1583 trillion KRW, representing 15% of the total trading volume of all listed companies (89.7129 trillion KRW). On the 10th, when Krafton, which attracted attention with a record-breaking public offering amount, was listed, the combined trading volume of KakaoBank and HK Innoen along with Krafton was 4.4 trillion KRW, accounting for 13% of the total (33 trillion KRW). Considering that Samsung Electronics, the largest company by market capitalization, had a trading volume of 1.6 trillion KRW that day, this highlights the strong investor interest in these rookie stocks.

However, the performance of these IPO stocks was disappointing compared to expectations. Krafton's closing price on the first day of listing fell 3.52%, below the public offering price, and KakaoBank dropped more than 9% on the same day. HK Innoen declined by 1.75%.

As a result, it is expected that investor interest will shift toward individual company earnings. Although investor attention had been focused on IPOs and there were concerns about peak earnings weakening profit momentum, the absence of major IPOs in the near term means that profit momentum will determine stock prices. Lee Kyung-soo, a researcher at Hana Financial Investment, suggested, "It seems necessary to pay attention to sectors with upwardly revised third-quarter earnings confirmed through the second-quarter earnings season this year, such as shipping, furniture, steel, non-ferrous metals, display, distribution, securities, textile and apparel, technology hardware, and banking."

The recent noticeable increase in global ESG ETF assets under management can also be utilized as an investment strategy. Looking at the performance of the MSCI EM Index and the MSCI EM ESG iShares ETF, the EM ESG index has outperformed the EM index by about 3.5 percentage points from last year through this year. The gap between the two indices has recently widened further. Hana Financial Investment analyzed sectors favorable for ESG fund inflows by reverse-calculating the differences in sector weights between MSCI EM and MSCI EM ESG ETFs, finding that financials, industrials, consumer staples, IT, and healthcare had large weights. The researcher stated, "The recent increase in ESG-related ETF assets in the U.S. and developed countries means that ESG scores are becoming as important as earnings in stock price evaluation," adding, "If ESG fund inflows increase, sectors like financials are likely to benefit more, which can be tentatively concluded."

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