Top 10 Conglomerates Lost 170 Trillion Won in Market Cap... Future Growth Engines to Revive Them

[Asia Economy Reporter Yoo Hyun-seok] The market capitalization of South Korea's top 10 conglomerates has decreased by 170 trillion won over the past six months. Stock prices were significantly influenced by performance affected by the economic downturn or the presence of future growth prospects and innovation stories.

On the 24th, Asia Economy analyzed data commissioned from financial information firm FnGuide, revealing that the market capitalization of 109 stocks from the top 10 groups (including 11th-ranked Shinsegae instead of 10th-ranked Nonghyup) stood at 1,164.8947 trillion won as of the 15th. This represents a 12.64% decrease compared to 1,333.5804 trillion won on December 31 of last year. In monetary terms, it decreased by 168.6857 trillion won from 1,333.5804 trillion won to 1,164.8947 trillion won as of the 15th of this month.

Among the top 10 groups, SK Group experienced the largest drop in market capitalization. During the same period, it fell from 211.2331 trillion won to 155.3872 trillion won, a 26.44% (55.8459 trillion won) decrease. Retail giant Shinsegae Group recorded a -23.97% decline, and POSCO, once a symbol of smokestacks, fell by -20.52%. Following were Samsung (-19.84%), Hanwha (-19.13%), GS (-18%), Hyundai Motor (-10.81%), and Lotte (-9.17%).

As most of the top 10 conglomerates' stocks traced a downward curve, the stock market also remained weak in the first half of this year. Experts analyze that concerns over a global economic recession were reflected in stock prices. Hwang Se-woon, a researcher at the Korea Capital Market Institute, said, "The risk of an economic recession is significantly reflected," adding, "When a recession occurs, it ultimately leads to a decrease in corporate sales and operating profits."

A detailed look at the changes in market capitalization of the top 10 groups shows that the decline was greater in industries sensitive to economic cycles. This implies that growing concerns about a global recession negatively affected perceptions of companies. With the worldwide 'three highs'?high inflation, high exchange rates, and high interest rates?and the resurgence of COVID-19, concerns about an economic downturn have deepened, making the outlook for the second half of the year bleak. As sales decline and profits are threatened, companies are expected to face significant difficulties in finding breakthroughs.

[Image source=Yonhap News]

◆ The greater the demand contraction concerns, the more market capitalization falls = An analysis of the market capitalization of the top 10 groups showed that conglomerates with industries expected to experience demand contraction due to the economic downturn saw larger decreases in market capitalization.

From December 31 last year to the 15th of this month, SK Group, which showed the largest decline among the top 10 groups (-26.44%), saw 24 trillion won evaporate from SK Hynix alone. Samsung Group's performance was also gloomy. Samsung Group's market capitalization dropped from 729.8449 trillion won to 585.0087 trillion won, a 19.84% decrease. Although the decline rate was less than SK Group's, the amount lost was about 140 trillion won. Among this, Samsung Electronics' market capitalization fell from 526.0235 trillion won to 403.1989 trillion won, losing over 120 trillion won.

The common factor among them is semiconductors. The semiconductor industry is currently facing concerns about demand contraction due to the economic downturn. SK Hynix recently showed signs of instability by deciding to postpone the expansion of its Cheongju plant.

Shinsegae Group, which shrank by more than 2 trillion won, was heavily impacted by its large supermarket, E-Mart. During the same period, E-Mart's market capitalization dropped from 4.2092 trillion won to 2.8294 trillion won, a decrease of 1.4 trillion won. This is interpreted as being influenced by global inflation and reduced consumer spending power.

For POSCO Group, POSCO Holdings underperformed. The group's market capitalization fell from 39.5103 trillion won to 31.4010 trillion won, a decrease of 8 trillion won. Among this, POSCO Holdings dropped from 23.9328 trillion won to 19.5299 trillion won, retreating by more than 4 trillion won. This is attributed to concerns over demand contraction in the steel sector, which accounts for the largest portion of POSCO Holdings' business.

◆ Holding steady thanks to new businesses or performance = Hyundai Motor Group's market capitalization decline rate was 10.81%, which is better than the overall top 10 groups' decline rate of -12.65%. Hyundai Motor's market capitalization decreased by about 6 trillion won from 50.9674 trillion won to 44.8589 trillion won, while Kia's fell by only 1.3 trillion won from 33.3209 trillion won to 32.0642 trillion won. Despite concerns over the supply of automotive semiconductors, they are expanding their market share globally. Especially in the electric vehicle sector, considered the future car market, they are showing results. According to energy market research firm SNE Research, Hyundai Motor and Kia ranked 5th globally in electric vehicle sales in the first half of this year with 248,000 units sold.

Hyundai Motor and Kia have recently shown sharp improvements in performance. Hyundai Motor's consolidated sales for Q2 reached 35.9999 trillion won, an 18.7% increase year-on-year. Operating profit for the same period rose by 58% to 2.9798 trillion won. Q2 sales surpassed the previous quarterly record of 31.0265 trillion won set in Q4 last year. Operating profit also exceeded the previous record of 2.0872 trillion won set in Q2 2014. Kia recorded Q2 sales of 21.876 trillion won and operating profit of 2.2341 trillion won, increases of 19.3% and 50.2% year-on-year, respectively. Both sales and operating profit set new quarterly records.

On the other hand, some groups saw an increase in market capitalization. LG Group's market capitalization reached 93.6 trillion won as of the 15th, boosted by the listing of LG Energy Solution. Hyundai Heavy Industries Group also increased by 2.17%, from 25.3379 trillion won to 25.8869 trillion won. Hyundai Heavy Industries rose from 8.4512 trillion won to 10.1201 trillion won, an increase of about 2 trillion won. Hyundai Mipo Dockyard also grew from 2.796 trillion won to 3.1754 trillion won, an increase of about 400 billion won. These companies benefited recently from increased demand for eco-friendly energy and the Russia-Ukraine war.

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