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| An electronic broad at a dealing room of Hana Bank's headquarters in Seoul shows the KOSPI's opening rally on Monday. The main bourse closed up 1.04 percent at 2,236.16. Yonhap |
By Lee Min-hyung
Shares of construction and securities firms have been on a rollercoaster ride amid fears of a liquidity crunch triggered by their poor management of real estate project financing.
According to data from the Korea Exchange, construction sector shares extended their biggest fall of 5.12 percent last week on growing risks of defaults amid freezing investor sentiment in the real estate market.
Brokerage shares also suffered a loss of 3.61 percent during the same period amid heightened concerns over their loan default rates. Data from the Financial Supervisory Service (FSS) also showed that the loan default rate of local brokerage houses' project financing reached 4.7 percent in the first quarter of 2022, up 1 percentage point from the end of 2021. Of concern is the rapid rise of the figure, which stood at only 1.3 percent at the end of 2019.
Shares of GS Engineering & Construction plunged for the past two months amid freezing investor sentiment. The builder's stock price reached over 33,000 won per share on Aug. 16, but fell to a two-month low of 21,400 won on Oct. 12.
Samsung C&T's share price also displayed a similar curve, hitting a high of 125,500 won in August but falling to around 100,000 won in late September.
But most construction shares bounced back slightly on Monday, a day after the government unveiled a plan to launch liquidity supply programs worth 50 trillion won to ease persistent jitters in the local financial markets.
The GS affiliate closed with a gain of 3.46 percent on the first trading day this week. Samsung C&T shares also edged up 1.37 percent during the same period.
Market analysts advised investors to expand their portions of shares in the industry, since their stock prices may have bottomed out.
"Construction stocks face undeniably negative factors and most firms in the industry should leave open the possibility of securing liquidity by additionally increasing their capital," said Kang Kyung-tae, an analyst at Korea Investment & Securities.
"But the outlook on possible bankruptcies of big construction firms appears to be low for the time being, and most unfavorable sentiment has already been reflected in the prices of construction stocks. We maintain our opinion of expanding the portion of construction shares."
Most securities stocks also remained lackluster for the past few months amid falling stock transactions caused by the U.S. Federal Reserve's aggressive set of rate hikes.
Shares of Mirae Asset Securities, the nation's largest brokerage house by market capitalization, reached a three-month high of 7,100 won on Sept. 8, but slipped to around 6,200 won per share at Monday's close.
Analysts said chances remain slim for brokerages here to achieve a meaningful rebound by the end of this year amid escalating concerns over their financial soundness regarding real estate project financing.
"Most brokerage houses are unlikely to regain momentum for a rally in the latter half of this year due to persistent concerns over their growth slowdown and the real estate project financing-related worries," Hyundai Motor Securities analyst Lee Hong-jae said.
