Naver and Kakao, Market Cap Drops by 14 Trillion Won in New Year

[Asia Economy Reporter Dongwoo Lee] The stock prices of Naver and Kakao, leading domestic big tech companies, are showing a downward trend amid concerns over the early tightening stance of the U.S. Federal Reserve (Fed).

According to the Korea Exchange on the 11th, since the beginning of the new year, Naver's stock price has plummeted by 11.49%, and Kakao's by 15.56%.

During this period, Naver's market capitalization decreased from 62.1 trillion won to 55 trillion won, and Kakao's from 50.2 trillion won to 42.4 trillion won, a reduction of 7.1 trillion won and 7.8 trillion won respectively. The combined market capitalization of the two stocks has fallen by 14.9 trillion won since the start of the year.

Naver's market cap ranking dropped two places from 3rd (including preferred shares) at the end of last year to 5th on this day. Kakao slipped from 6th to 9th place.

The sharp decline in Naver and Kakao's stock prices at the beginning of the year is primarily attributed to concerns over the Fed's early tightening.

At the Federal Open Market Committee (FOMC) meeting in December last year, the Fed increased the pace of tapering asset purchases, and recently, the possibility of early interest rate hikes and early quantitative tightening (QT) has emerged, putting pressure on the stock prices of growth stocks with high valuations.

Growth stocks, which focus more on future earnings than current performance, are evaluated lower when interest rates rise because the discount rate applied to future earnings increases. Based on the closing prices at the end of last year, Naver's 12-month forward price-to-earnings ratio (PER) was 33.96 times, and Kakao's was 46.74 times, both higher than the KOSPI 200 index's 11.08 times.

Regulatory issues related to online platforms have also affected the poor performance of Naver and Kakao's stock prices.

Last year, financial authorities and the Fair Trade Commission put brakes on Kakao's "octopus-like" business expansion, and political circles accelerated discussions on regulatory bills for online platforms, sparking controversy.

In response, in September of the same year, Kakao announced a plan to establish a mutual growth fund for small business owners and to withdraw from some businesses.

As a result, Kakao's stock price lost momentum, making it difficult to surpass the previous high closing price of 169,500 won (June 23, 2021). Naver has also shown sluggish performance since closing at 454,000 won on September 6 last year.

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