The KOSPI market experienced a dramatic drop of over 5% in a single day, triggering a circuit breaker amid extreme volatility. In this turbulent environment, preferred stocks, which had been overlooked during recent rallies, are gaining attention as a safe haven. On June 26, while major common stocks plummeted, preferred stocks demonstrated relative resilience, creating a stark contrast in weekly performance.
According to the Korea Exchange, large-cap stocks saw significant declines due to simultaneous selling by foreign and institutional investors, but the sentiment surrounding common and preferred stocks differed markedly.
Samsung Electronics closed down 5.30% at 339,500 won, while other leading stocks such as Hyundai Motor (-4.47%), Samsung C&T (-4.72%), LG Chem (-5.08%), and SK (-5.01%) also faced heavy losses.
In contrast, large preferred stocks showed a degree of downward rigidity despite the overall market's decline. Samsung Electronics preferred shares (-6.17%) slightly exceeded the drop of common shares, but Hyundai Motor preferred (-2.28%), Hyundai Motor 2nd preferred B (-3.87%), Samsung C&T preferred B (-0.17%), LG Chem preferred (-3.06%), and SK preferred (-4.81%) attracted buying interest during the day, helping to mitigate the sharp declines in common stocks.
On this day, the KOSPI index closed at 8,411.21, down 519.09 points (5.81%). At one point, the index fell more than 8%, prompting the circuit breaker to be activated and trading to be temporarily halted.
As the day ended, the temperature difference between common and preferred stocks became evident. Analyzing the cumulative weekly performance from June 22 to 26, the divergence became even clearer.
During this period, preferred stocks significantly outperformed common stocks. The most dramatic contrast was seen in Samsung C&T and Kyeyang Electric. This week, Samsung C&T common shares remained flat at 0.61%, while its preferred shares surged by 12.87%. Similarly, while Kyeyang Electric common shares rose by 2.19%, its preferred shares skyrocketed by 22.65%. Kumho Construction's common shares increased by 57.86%, while its preferred shares recorded a remarkable 62.07% rise, surpassing the gains of common stocks.
While common stocks faced declines, preferred stocks showed upward trends. For instance, Yuhwa Securities saw its common shares drop by 7.52%, while its preferred shares rose by 4.88%. Other similar trends were observed with Dongbu Construction preferred (4.87%) and Dongbu Construction (-0.16%), Yuyu Pharmaceutical 1st preferred (3.34%) and Yuyu Pharmaceutical (-5.66%), NPC preferred (4.17%) and NPC (-2.76%), and Hite Jinro Holdings preferred (1.90%) and Hite Jinro Holdings (-6.72%).
Since the beginning of the year, large common stocks have experienced rapid gains, leading to valuation pressures and increased volatility. This has prompted investors to turn to preferred stocks, which are generally cheaper and offer higher dividend yields, resulting in a phenomenon known as 'key matching.' Preferred stocks typically lack voting rights but are generally priced lower than common stocks, making their high dividend appeal more pronounced during market downturns.
Market analysts suggest that as profit-taking pressures increase among semiconductor stocks, which have been leading the market's rise, the trend of investors favoring relatively safe and attractively priced preferred stocks may continue.
Im Jeong-eun, a researcher at KB Securities, stated, "The domestic stock market fell due to concerns over memory cost burdens and increased profit-taking pressures following the previous day's surge. In particular, profit-taking from semiconductor stocks, which had been driving the index's strength, has amplified market volatility."
* This article has been translated by AI.
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