Growth Stocks Gaining Momentum... Will Retail Investors Warmly End the Year with Nekaoh 'Picking Up'?

Naver up 3%, Kakao up 3%, KakaoPay up 28% in December
Bright outlook for Naver and Kakao's next year earnings... Caution needed due to rapid interest rate fluctuations

[Asia Economy Reporter Minji Lee] Individual investors who focused on buying Naver (NAVER) and Kakao even during the stock price downturn are now smiling. This is thanks to the improved investment sentiment toward domestic and international growth stocks, as the interest rate hike cycles of major countries are coming to an end.

According to the Korea Exchange on the 14th, from the 1st to the 13th of this month, the KRX Internet K-New Deal Index rose by 7.34%, showing the highest increase among thematic indices. It also outperformed the KOSPI return (-4%). The stock price rises of major stocks such as Naver (3%), Kakao (3%), and Kakao Pay (28%) led the upward trend of the KRX Internet K-New Deal Index.

These companies, classified as representative domestic growth stocks, experienced a steep decline after the intense interest rate hikes since August. However, as inflation slowed and concerns about economic recession expanded, expectations for interest rate cuts grew, bringing warmth back to growth stocks. Soeun Ahn, a researcher at KB Securities, analyzed, “As worries about the economy and corporate profits ease and expectations that the base interest rate peak is within sight form, a favorable environment for growth stocks is being created,” adding, “This is an environment where the scarcity and appeal of growth inherent in growth stocks can be highlighted.”

Individual investors, who had been anxious about the rising stock prices of Naver and Kakao, are estimated to have gained considerable profits. From September 1 to November 30, individual investors purchased Naver, Kakao, and Kakao Pay stocks worth 927 billion KRW, 520.3 billion KRW, and 113.8 billion KRW respectively. Based on the average purchase price estimated from net buying transaction amounts and volumes, the prices were 179,000 KRW for Naver, 52,600 KRW for Kakao, and 48,000 KRW for Kakao Pay. If individuals bought stocks at these prices and did not sell them until the 13th, Naver shareholders would have recorded a 7.8% return, while Kakao and Kakao Pay shareholders would have seen returns of 10% and 42%, respectively. In the case of Kakao Pay, if purchased at the low point on October 17 (32,400 KRW) and held until now, the return could have reached up to 110%.

Experts agree that, with the weakening outlook for interest rate hikes, the rebound of growth stocks may continue for the time being. Since the proportion of foreign and institutional investors has decreased, there is also potential for further price increases. The foreign investor ratio among Naver investors sharply dropped from 56% at the beginning of the year to 48%, and Kakao’s ratio decreased from 30% to 26.9%.

Of course, caution is needed not to rush into investments based solely on the improved sentiment toward growth stocks. Concerns remain that the economic recession could deepen more than expected due to rapid interest rate hikes. It is advisable to buy while confirming earnings improvements. According to securities firms’ estimates, Naver’s expected operating profit for next year is 1.46 trillion KRW, up from this year’s estimate of 1.3236 trillion KRW. Kakao is also predicted to increase operating profit by about 170 billion KRW, from 630 billion KRW this year to 800 billion KRW next year. Jaemin Ahn, a researcher at NH Investment & Securities, forecasted, “Next year, profitability is expected to improve due to reductions in labor and marketing costs at Naver and Kakao, and high growth in new business sales such as fintech and webtoons is anticipated,” adding, “Although external factors like the economy will have an impact, the advertising business and commerce sectors, which are major revenue sources, are expected to show gradual improvement.”

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