Frozen Stock Market Sees Mixed Fortunes for Recession Stocks (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The fortunes of recession stocks, which tend to perform relatively well during economic downturns, are diverging. While bond collection-related companies' stock prices have risen due to the interest rate hike trend, traditional recession stocks such as telecommunications and mobile phone micro-payment-related stocks are weak.

According to the Korea Exchange on the 12th, Korea Credit Information closed at 13,650 KRW, up 13.75% compared to early last month. It rose 3.41% just the previous day. SCI Evaluation Information recorded an even steeper increase, rising 17.27% from the previous trading day to 4,685 KRW, which is more than a 55% increase compared to early last month.

These companies, involved in bond collection and credit investigation, have been on the rise as the Bank of Korea shows a trend of raising the base interest rate. This is due to expectations that the interest burden on borrowers will increase with the rate hikes, leading to more debtors unable to repay on due dates.

The Bank of Korea's Monetary Policy Committee held a meeting on the morning of the same day and raised the base interest rate from 2.50% to 3.00%. Previously, the Bank of Korea had consecutively raised the base rate four times in April, May, July, and August this year. Through these five hikes so far, the base rate has increased by 2.50 percentage points in about 1 year and 2 months. Along with the hikes, expectations that the Bank of Korea would implement a big step by raising the base rate by 50 basis points (1bp = 0.01 percentage points) at once led to the rise in bond collection-related companies' stock prices.

On the other hand, other recession stocks such as telecommunications and mobile phone micro-payment-related stocks are weak. KT recorded 33,900 KRW, down 2.45% from the previous trading day, and 7.50% lower than early last month. SK Telecom also fell 3.99% the previous day, dropping 7.06% over the same period. Telecommunications stocks are considered recession stocks because even when the economy worsens, communication fees are not easily reduced. Additionally, relatively high dividends attract investors' attention during economic downturns. However, as the domestic stock market stagnation period lengthens, telecommunications stocks are also struggling.

KG Mobilians, a mobile phone micro-payment-related stock, closed at 5,320 KRW, down 6.50% the previous day, and plunged 21.53% compared to the stock price of 6,780 KRW one month ago. Mobile phone micro-payment-related stocks are classified as recession stocks due to expectations that people lacking cash will flock to micro-payments.

Researcher Heo Jae-hwan of Eugene Investment & Securities explained, "Overall, the attractiveness of stocks as an asset is declining," adding, "Bond collection-related stocks seem to be benefiting from the base rate hike, but if the (stock market) situation worsens further, the rise may not continue."

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