Leading Stocks' Slump Draws Attention to Overlooked Stocks

[Asia Economy Reporter Song Hwajeong] As concerns over early tightening from the U.S. have led to sluggish stock markets, leading stocks are also showing weakness. In response, Shinhan Financial Investment advised that it is necessary to pay attention to sectors that have been neglected so far.

According to Shinhan Financial Investment on the 15th, the early tightening issue by the U.S. Federal Reserve (Fed) has shaken the landscape of leading stocks, with non-fungible tokens (NFT) and metaverse-related stocks, which led the KOSDAQ rise in the fourth quarter of last year, showing a decline of over 10% since the beginning of the year. While value stocks including financials have been re-highlighted, the decline in sectors and themes that had been neglected has calmed down.

The period during which leading stocks outperform the market has been shortening since the second half of last year. Researcher Kim Dami of Shinhan Financial Investment stated, "Since 2010, the relative cumulative returns of the top 10% leading stocks and the bottom 10% neglected stocks in KOSPI monthly returns turned downward starting from the second half of 2021," adding, "In periods where the return gap between leading and neglected stocks narrows, a strategy of re-approaching previously neglected sectors is effective."

Analyzing the recent three-month returns of major domestic market themes, reopening (resumption of economic activities), bio, and hydrogen-related stocks showed the weakest performance. Shinhan Financial Investment recommended hydrogen-related stocks among the neglected stocks. Except for hydrogen-related stocks, most themes are highly correlated with COVID-19, making it difficult to predict the recovery timing. Researcher Kim explained, "Reopening faces uncertainty in earnings recovery due to the Omicron variant," and "Bio stocks are sensitive to individual stock issues amid weakened investor sentiment following the approval of COVID-19 oral treatments." Furthermore, Kim added, "Concerns over the delay in passing the hydrogen law amendment and the reduction in fuel cell development by Hyundai Motor and Toyota, which were factors in the decline of hydrogen-related stocks, are expected to peak during the first quarter."

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