Seventy-five percent of KOSPI-listed stocks traded below a price-to-book ratio of 1.0 on July 29, marking the highest proportion this year. The undervaluation surge stems from a sharp market correction following concentrated gains in semiconductor and large-cap technology stocks, with 600 out of 802 tradable stocks now valued below their book value. The Korean stock market peaked at 9114.55 on June 22 before declining to the mid-5000s within a month, dragging most companies' market capitalizations below their net asset values. This phenomenon persisted even during the rally period from May to June, when the index recovered to the 8400 level but low-PBR stocks continued increasing to 67% and 70% respectively, indicating that gains remained confined to AI-driven semiconductor leaders like Samsung Electronics and SK Hynix while other sectors languished despite solid earnings.
Market Correction Drives KOSPI Stocks Below Book Value
According to Korea Exchange data, 600 out of 802 stocks on the securities market recorded PBR below 1.0 as of July 29, excluding preferred shares and trading-halted stocks where PBR cannot be calculated. The proportion of sub-1.0 PBR stocks rose from 66% at the end of January to 63% in February, then climbed to 67% in May, 70% in June, and reached 75% in July.
Major market-cap stocks experienced significant PBR declines during the recent correction. Hyundai Motor's PBR fell from 1.13 in June to 0.83 on July 29, while its stock price dropped 28.5% from 495,000 won to 353,500 won during the same period. Large-cap semiconductor stocks were not exempt from the decline. Financial and securities stocks maintained low PBR levels, with Korea Financial Group at 0.94, Shinhan Financial Group at 0.83, SK Securities at 0.67, and Shinyoung Securities at 0.59.
Semiconductor Rally Concentration Leaves Sectors Behind
The increase in undervalued stocks cannot be attributed solely to the recent correction, as low-PBR stocks actually increased during the market's upward trajectory. In May and June, when KOSPI recovered to the 8400 level—near its annual high—the proportion of sub-1.0 PBR stocks rose to 67% and 70% respectively, indicating that index gains did not spread across the market.
This year's domestic stock market rally was led by large-cap semiconductor stocks including Samsung Electronics and SK Hynix, driven by expectations of expanded artificial intelligence investment. Most other sectors remained excluded from the upward momentum despite strong earnings, with stock prices staying below net asset values. The July market plunge caused most stocks outside the leading sectors to decline together, further depressing already-low PBR levels.
Analysts Cite Earnings Growth in Non-Semiconductor Sectors
Market observers suggest sector rotation could emerge if leading stocks stabilize. Since June 19, when KOSPI reached its intraday all-time high of 9385.59, most of the 26 sectors on the securities market declined except for banks, consumer staples, and healthcare, yet forward earnings per share increased. Sectors including machinery (4.56%), insurance (11.9%), retail and distribution (3.7%), securities (3.0%), and energy (10.3%) saw upward earnings estimate revisions for this year.
Noh Dong-gil, researcher at Shinhan Investment Securities, stated: "If semiconductors plunge further, non-semiconductor strength will likely remain defensive in nature. Healthy sector rotation can spread across the market only when semiconductor declines stop and earnings estimates are maintained."
FAQ
What percentage of KOSPI stocks traded below book value on July 29?
Seventy-five percent of KOSPI-listed stocks, representing 600 out of 802 tradable stocks, recorded price-to-book ratios below 1.0 on July 29, marking the highest proportion this year.
Why did undervalued stocks increase even during the market rally?
During the May-June rally when KOSPI recovered to the 8400 level, the proportion of sub-1.0 PBR stocks increased to 67% and 70% because gains remained concentrated in semiconductor and large-cap technology stocks driven by AI investment expectations, while most other sectors stayed excluded from the upward momentum despite solid earnings.
