Korea's stock market saw its biggest swing since the global financial crisis last month, with seven out of every 10 companies listed on the KOSPI and KOSDAQ posting share price declines. Amid concerns over a slowdown in the semiconductor industry and geopolitical risks from the Middle East that froze investor sentiment, Kolon TissueGene plunged 86% in a single month due to the fallout from a clinical trial failure, recording the largest decline. However, securities analysts noted that corporate earnings forecasts remain solid and are focusing on the possibility of a rebound following the excessive drop.
70% of Listed Companies Fall; Kolon TissueGene Posts Largest Decline of 86%
According to the Korea Exchange (KRX) on the 2nd, 1,859 (70%) of the 2,645 companies listed on the KOSPI and KOSDAQ saw their share prices fall as of the 31st of last month compared with the end of June. By market, 566 (62%) of 917 KOSPI stocks declined, while 1,293 (75%) of 1,728 KOSDAQ stocks fell, showing a steeper drop on the KOSDAQ.
In July, the KOSPI plunged 22.2% and the KOSDAQ 21.4%. This marks the largest monthly decline since October 2008, during the global financial crisis. In particular, the KOSPI plunged 10.84% on the 28th of last month, followed by additional declines of 5.98% on the 29th and 1.23% on the 30th, before rebounding sharply by 17.9% on the 31st. Even so, it remained more than 1,881 points below its end-of-June closing level.
The hardest-hit stock was Kolon TissueGene. Its share price fell from 93,600 won at the end of June to 13,000 won at the end of July, plunging about 86% in a month. Investor sentiment deteriorated sharply after the company announced on the 20th of last month that the first study of the Phase 3 clinical trial for its osteoarthritis cell and gene therapy "TG-C," conducted in the United States, failed to achieve statistical significance in its primary endpoint compared with the placebo group. From the 21st, the stock hit the daily lower limit for three consecutive trading sessions, and on the 30th of last month, it fell to 12,550 won intraday, setting a new 52-week low.
The negative news was not limited to the clinical results. The Seoul Central District Court on the 9th of last month issued a partial victory ruling for the plaintiffs in a damages lawsuit filed by patients and bereaved families who claimed to have died or suffered harm after receiving Invossa. Subsequently, on the 29th, three internal directors—Kolon Group Vice Chairman Lee Kyu-ho, CEO Jeon Seung-ho, and Chief Financial Officer (CFO) Kim Jung-in—purchased a total of 260 million won worth of treasury shares on the market, signaling their commitment to responsible management.
Following Kolon TissueGene, The Technology (-76%), Kolon Life Science (-67%), Contentree JoongAng (-67%), StradVision (-65%), and Justek (-64%) also fell sharply. On the other hand, the top gainer was GNE Healthcare, which surged 222%, followed by ICH (87%), Vect (86%), Enex (85%), and Joyworks & Co (75%). This is interpreted as the effect of funds flowing out of large-cap semiconductor stocks and moving into some small- and mid-cap stocks.
"Earnings Hold Up"...Securities Analysts Eye Possibility of August Rebound
Securities analysts are leaving open the possibility of a rebound, as the recent sharp decline was driven largely by weakened investor sentiment and supply-demand instability rather than by deteriorating corporate earnings.
Lee Kyung-min, a researcher at Daishin Securities, explained to Yonhap News that "the KOSPI has entered an excessively undervalued zone in both valuation and technical terms, with a 12-month forward PER of 4.7 times, the lowest level since 2000." He added that forward earnings per share (EPS) and profit forecasts for this year and next year are actually being revised upward, and projected that if the KOSPI settles at the 5,700-5,800 range, the recent sharp decline could also normalize quickly.
Han Ji-young, a researcher at Kiwoom Securities, also analyzed that even after the sharp rebound at the end of July, the market remains in oversold territory, noting that it is worth paying attention to the fact that confidence in earnings across the Korean stock market is recovering through the earnings of leading semiconductor stocks such as Samsung Electronics and SK hynix.
