Thematic investment remains popular despite KOSPI downturn
By Lee Min-hyung
More retail investors appear to be blinded by the relentless ups and downs of certain tech-linked stocks here, as people look to get rich quick after a recent bullish cycle powered by secondary battery shares.
Thematic investing has always prevailed in the stock market, but the latest case, centered on state-of-the-art technologies is somewhat different from the past, as it was initiated by large-cap tech stocks, represented by EcoPro and POSCO, rather than smaller ones with less solid fundamentals.
This has created the sentiment that betting on trendy tech stocks is safer than going for non-tech areas.The EcoPro-driven rally lasted for almost a month in July when most shares producing battery materials surged to an unfathomable level.
But as is the case for all other assets, prices of battery-linked shares started facing a downward adjustment from the end of last month.
Before long, retail investors shifted their gaze to superconductors.Late last month, Quantum Energy Research Center, a Seoul-based research company, argued that LK-99 might be a superconductor ― a material that shows no electrical resistance at a low temperature.
Following the report, shares linked with superconductors soared at an alarming pace.Shares of Duksung, a semiconductor material manufacturer, surged early in August after the company was classified as a superconductor-linked stock.Duksung shares had hovered around 5,000 won per share for almost a year, but its value more than doubled to over 13,000 won.
However, the rally did not last long, after Nature, a British science journal, released a skeptical opinion against the latest announcement by the Korean research team.The firm’s stock price has since plunged sharply to around 7,000 won, and is still on a rollercoaster ride.
Shinsung Delta Tech, which was sorted as a stock with a similar theme, also displayed volatility in its stock price.Its shares hovered at a range of 10,000 to 20,000 won until July, but jumped sharply to 60,000 won per share recently.
The firm’s valuation also remains volatile up until now due to continuous debates on the research.
The biggest risk from the viewpoint of retail investors who jumped into the buying spree of the tech-themed stocks is that few of those firms classified as such actually engage in businesses related to the spotlighted material.Market watchers, therefore, voice concerns over the possibly abrupt collapse of such shares, as the stock growth was not driven by their enhanced corporate fundamentals.
“Retail investors’ recent thematic investment is clearly differentiated from typical ones previously seen in the stock market, as the thematic cycle is changing continuously without a break,” an official from a local securities firm said.
“Another characteristic is that the overall trend focusing on the tech sector remains in place for more than a month, which is rarely seen from most other thematic investing,” he said.”Investors who joined the second chapter of the trend ― with a theme of superconductors ― should pay special attention, as most superconductor-linked stocks are not as huge as secondary battery material shares.”
The trend, however, is showing no signs of ending soon with the rise of MXene ― a two-dimensional transition metal carbide, nitride and carbonitride ― often dubbed a revolutionary material after a research team from the Korea Institute of Science and Technology (KIST) announced the possibility of its mass production last week.
Shares of Huvis, a polyester fibers manufacturer here, reacted sensitively to the latest research findings.Its stock price achieved a sharp rise to 10,000 won per share on Wednesday from its earlier range of around 4,500 won.The company was classified as a group of MXene-themed stocks.
But amid growing investor attention, the company said it “does not have any direct link to the KIST research.”
Another industry source also expressed concerns over the unceasing cycle of tech-themed stock investment.
“The fundamentals of the overall stock market here are not robust enough, as is evidenced by the recent performance of the benchmark KOSPI,” a source from the local financial industry said.Earlier this month, the main bourse achieved this year’s high of more than 2,600 points on the large-cap battery rally.
The index has since been heading in a downward trajectory after investors’ attention to battery materials players shifted to the aforementioned tech-themed stocks.
Experts also advised investors not to jump into the frenzied thematic investment.
“Thematic stocks are emerging all the time in the stock market, but retail investors have a slim chance of gaining by betting on the short-term buying and selling,” Kim Dae-jong, a professor of business administration at Sejong University,” said.
“Thematic investment is forecast to emerge more frequently due to the rise of YouTube and other forms of one-man media outlets.The government should also step up its educational efforts for the public to gain better financial knowledge, so as to prevent investors from suffering losses from thematic investment.”
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