The domestic stock market has plummeted nearly 30% in the past month, yet financial stocks have emerged as a safe haven, recording positive returns. Analysts attribute this trend to capital shifts due to semiconductor adjustments and the momentum from rising benchmark interest rates, which have bolstered bank stocks and other financial shares.
On July 20, the Korea Exchange reported that the KOSPI opened at 6,643.58, down 177.02 points (2.60%) from the previous trading day, while the KOSDAQ fell 18.63 points (2.35%) to 773.21. As losses widened, a sell-side circuit breaker was triggered in the KOSDAQ at 10:52 a.m. and in the KOSPI at 11:21 a.m. Ultimately, the KOSPI closed down 304.33 points (4.46%) at 6,516.27, and the KOSDAQ finished down 42.20 points (5.33%) at 749.64.
In this recent downturn, financial stocks have stood out. According to the Korea Exchange, the KRX Bank Index rose 1.48% over the past month, making it the only sector index to record positive returns during this period, while the KOSPI fell 28.11%. Among thematic indices, the KOSPI 200 Financial High Dividend TOP 10 Index increased by 0.38%, also the only one to show an upward trend. After underperforming the KOSPI in the first half of the year, bank stocks surged 8.25% in July, significantly outperforming the market.
Individually, Hana Financial Group saw a 5.79% increase over the past month, while KB Financial rose by 3.49%, and Shinhan Financial Group gained 0.99%.
Market analysts suggest that the adjustment in the semiconductor sector has led institutional funds to flow into bank stocks, alongside rising benchmark interest rates and a strengthening won, which have positively influenced investor sentiment towards these stocks.
Choi Jeong-wook, a researcher at Hana Securities, stated, "As the semiconductor adjustment continues, domestic institutions are persistently buying bank stocks. The Bank of Korea's interest rate hikes have also led to an increase in government bond yields, maintaining the momentum for interest rates. The strengthening of the won, which briefly fell below 1,480 won against the dollar, has further fueled expectations for improved bank fundamentals."
According to Hana Securities, last week, domestic institutions sold approximately 1.6 trillion won worth of KOSPI stocks but purchased about 200 billion won in bank stocks. In contrast, foreign investors bought around 746 billion won in KOSPI stocks but sold about 109 billion won in bank stocks. This indicates that institutional funds are increasingly flowing into financial stocks amid ongoing adjustments in semiconductor shares.
Market participants view the upcoming second-quarter earnings reports from banks, starting this week, as a potential factor for the continued strength of financial stocks.
Choi noted, "The second-quarter earnings season kicks off this week with Shinhan Financial and KB Financial. Given the high expectations for their performance, whether they can exceed market expectations will be a key focus."
He added, "While we expect bank stock prices to continue rising in the medium to long term, the recent surge may lead to temporary corrections. In the short term, we recommend focusing on bank stocks with attractive valuations."
Kim, another researcher, commented, "With the second-quarter earnings season beginning this week, particularly for the banking sector, considering the solid performance improvements, it is advisable to approach this from a perspective of increasing exposure. If improvements in net interest margin (NIM) and interest income growth, along with enhanced shareholder returns, are confirmed, it could elevate the valuations of domestic banks to a new level."
* This article has been translated by AI.
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