Large-cap stocks in Korea prone to more volatility than smaller peers

Large-cap stocks in South Korea’s main and secondary Kospi and Kosdaq markets are more vulnerable to volatility than small- and mid-size stocks, data showed Sunday.

According to an analysis by the Korea Exchange, which tracked stock price movements from early this year to August 25, large-cap stocks on the Kospi market rose during periods of market upsurge. The stocks, however, also recorded the most substantial decline during periods of market downturn.

The Korea Exchange classifies stocks into large, mid, and small-cap based on their market capitalization.

On the Kospi, the top 100 market capitalization stocks are designated as large-cap, while 101~300 market capitalization stocks as mid-cap, and below 301 as small-cap.

Similarly, on Kosdaq, stocks are classified with market capitalizations from 1 to 100 as large-cap, 101 to 400 as mid-cap, and 401 and below as small-cap.

As of the closing price on Friday, the spectrum of large-cap stocks on the Kospi market stretches from Samsung Electronics Co. to SD Biosensor Inc. Mid-cap stocks include Hanwha Ocean Co. and Dongil Industries Co. Youngpoong Paper Mfg Co. is categorized as a small-cap stock.

On the Kosdaq market, the domain of large-cap stocks extends from EcoPro BM Co. to LegoChemBio. The mid-cap stocks span from Lunit Inc. to NewG Lab Pharma Co., while the range of small-cap stocks stretches from Emro.

The period from the beginning of the year to August 25 can be characterized as a phase marked by ascending stock prices.

Throughout the period, the Kospi soared 12.64 percent, while the Kosdaq 32.4 percent. During this phase, Kospi large-cap stocks slightly outperformed the benchmark as a whole, gaining 13.82 percent.

In contrast, Kospi mid-cap stocks underperformed, adding only 5.47 percent. Kospi small-cap stocks moved in sync with the benchmark, gaining 12.61 percent.

On the Kosdaq market, there was a noticeable skew towards large-cap stocks, driven by the prominence of secondary market large-cap stocks leading the rally.

The Kosdaq surged 32.4 percent and large-cap stocks ascended 57.51 percent. The trend was primarily due to significant increases in the share prices of major secondary battery stocks like EcoPro BM during the period.

However, Kosdaq mid-and small-cap stocks showed limited gains.

Since the beginning of the year, Kosdaq mid-cap and small-cap stocks have soared by only 16.6 percent and 13.66 percent, respectively.

During market declines, in the meantime, large-cap stocks demonstrated weaker performance. The trend implies that the volatility of the market is being driven by the performance of large-cap stocks.

Over the last month, the Kospi has seen a decline of 4.16 percent, while the Kosdaq 3.28 percent. In the monthly period, large-cap stocks on the Kospi lost 4.47 percent, the weakest performance among large, mid, and small-cap stocks across both markets.

Kospi mid-cap stocks fell 2.69 percent and small-cap stocks 1.86 percent.

Similarly, on the Kosdaq, the losses among large-cap stocks were more pronounced, with a decline of 3.79 percent over the same period. In contrast, mid-cap stocks and small-cap stocks fell 3.34 percent and 2.13 percent, respectively.

This contrasts somewhat with the conventional belief that large-cap stocks tend to deliver milder gains during market uptrends and smaller losses during market downturns.