Are Game Stocks With Heavy Bargain Buying Stretching Out?

Pearl Abyss Recovers to 90,000 Won in One Month
Kakao Games and NC Also Show Rebound Trend

[Asia Economy Reporter Song Hwajeong] Although game stocks, which were sluggish last month, showed strength for the first time in a while due to low-price buying inflows centered on institutions, it remains to be seen whether the upward trend will continue.

According to the Korea Exchange on the 8th, Pearl Abyss closed at 90,700 won, up 6.21%, recovering the 90,000 won level for the first time in about a month. Its market capitalization ranking also rose, reclaiming the 3rd place position for the first time in a while. Kakao Games also rose 7.5%, turning positive after 7 trading days. NCSoft rebounded nearly 2% after four days, and Netmarble rose for two consecutive days.

Game stocks had shown sluggish price movements last month due to regulatory issues from China and the failure of NCSoft's new release to perform well. The recent rebound in game stocks is interpreted as being due to the inflow of low-price buying. Buying continued mainly by institutions, driving up stock prices. Institutions have consecutively purchased Pearl Abyss for 7 trading days, Kakao Games for 3 trading days, and especially for Krafton, they recorded net purchases on all but one day since September.

However, it remains to be seen whether the rebound supported by low-price buying will continue. Most game stocks that showed strength the previous day are showing weakness today. Expectations for game stocks' third-quarter earnings are also not high. According to financial information provider FnGuide, the consensus operating profit forecast for the KOSDAQ IT Software (SW) & SVC sector, which includes game stocks, is 338.1 billion won for the third quarter, expected to increase by 41.54% compared to the same period last year. This figure has been revised downward by 1.39% compared to a month ago.

Ultimately, the stock price direction is expected to depend on the success of new releases. Kim Donghee, a researcher at Meritz Securities, said, "A paradigm shift in game industry investment is underway in 2021, with Devsisters’ ‘Cookie Run: Kingdom’ in January and Kakao Games’ ‘Odin: Valhalla Rising’ in June succeeding, showing that mid-sized game companies can significantly level up their performance and corporate value with successful new games." He added, "The competitive landscape of the domestic game market is still evolving depending on game success, and it is time to focus on the release results of ‘PUBG: New State’ at the end of October and ‘Lineage W’ in November."

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