Value stocks gain traction in Korea as growth stocks lose ground

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Investors in South Korea are turning to value stocks, such as financial stocks, as they are showing signs of rebound as to growth stocks.

According to the Korea Exchange on Wednesday, the KRX Insurance Index has gained 6.9 percent this month and the KRX Bank Index 2.4 percent. The gains came despite the benchmark Kospi’s decline of 1.2 percent and secondary Kosdaq 4 percent.

Shares of KB Financial Group gained 3.2 percent this month and Korea Investment Holdings Co. 4 percent. Hanwha Life Insurance Co. soared 14.1 percent this month on expectations that the company will offer dividends this year after no allocation for two years.

Secondary battery stocks, on the other hand, which led the bullish market in the first half of the year, are on a decline.

Shares of EcoPro Co dipped below the 900,000 won ($677.7) threshold on Wednesday, returning to the levels seen three months ago. Shares of POSCO Future M Co. also lost 10 percent this month.

Other growth stocks in sectors such as chip equipment, healthcare, and robot manufacturing also saw prices plunge amid falling valuations. The developments led the Kosdaq to fall to 882.72 points on Wednesday, down 1.7 percent from the previous close.

The cycle, in which growth stocks plunge and value stocks rebound, is also seen in the U.S. stock market.

Despite the earnings that surpassed market expectations at the end of last month, shares of Nvidia Corp. fell 9.4 percent this month. Shares of ExxonMobil Corp., on the other hand, gained 5.6 percent on rising oil prices. Financial giant Berkshire Hathaway Inc. reached a new all-time high on Tuesday, local time.

Domestic brokerages are optimistic about the performance of financial stocks, which delivered robust second-quarter results, with upward revisions of operating profit forecast for the second half. Financial stocks will exhibit strong price performance by year-end, according to brokerage forecasts.

“The recovery in the semiconductor industry has been slower than the market expectations, and the performance of the secondary battery industry hasn‘t been up so far,” said Yoon Chang-yong, the director of a research unit at Shinhan Securities Co. “These market conditions could support sectors like the oil, steel, and financial industries, which exhibit strength in operating income and dividend yields.”