South Korean banking stocks rose 6.96% in July as measured by the KRX Bank Index, while the broader KOSPI fell 12.73% during the same period, according to Korea Exchange data released July 8. The divergence occurred as investors rotated out of semiconductor leaders Samsung Electronics and SK Hynix into undervalued defensive sectors including banks, food and beverage, and cosmetics. The shift reflects profit-taking in chip stocks that had previously driven market gains, combined with expectations of stable earnings from financial institutions amid potential interest rate increases by the Bank of Korea.
Banking Stocks Outperform Semiconductor Leaders in July
The KRX Bank Index reached 1620.81 on July 8, marking the highest sectoral gain among Korea Exchange-calculated indices. Major banking stocks posted significant gains during the period: Shinhan Financial Group rose 11.31%, KB Financial increased 7.89%, Hana Financial Group climbed 5.07%, and Woori Financial Group advanced 4.60%. These gains contrasted sharply with semiconductor stocks, as Samsung Electronics fell 11.76% and SK Hynix declined 18.90% over the same timeframe.
Banking stocks traded at low price-to-book ratios as of July 8: Woori Financial Group at 0.61, Hana Financial Group at 0.75, Shinhan Financial Group at 0.87, and KB Financial at 1.04. According to Kiwoom Securities, the forward fourth-quarter return on equity (ROE) forecast for banking stocks stands at 9.2%.
Food and Beverage Sector Posts Second-Highest Gains
The food and beverage index reached 4809.69 on July 8, recording a 5.25% increase in July and ranking as the second-highest performing sector after banking. During the three trading days from July 6 to 8, when KOSPI fell 10.40%, Orion rose 2.93% over three consecutive sessions. Securities firms project Orion's operating profit will reach approximately 650 billion won this year, which would represent a record high, driven by overseas business performance.
Cosmetics Stocks Rally on K-Beauty Export Growth
Cosmetics stocks showed strength amid the market decline. On July 8, when KOSPI fell 5.35%, It's Hanbul rose 13.52%, ranking 11th among all KOSPI-listed stocks and sixth when excluding five inverse leveraged ETFs. On KOSDAQ the same day, Beauty Skin hit its daily limit up (+29.90%), while Manyo Factory gained 18.44%.
According to the Ministry of Food and Drug Safety, cosmetics exports in the first half of the year increased 27.3% compared to the same period last year, reaching $7 billion (approximately 10.6 trillion won) and setting a record for the half-year period.
Lee Kyung-min, a researcher at Daishin Securities, stated: "In July, when volatility expands, a short-term rotation strategy centered on undervalued and overlooked stocks relative to earnings is necessary. Around the KOSPI 8,000 level, an accumulation strategy for leading stocks such as semiconductors will be effective."
FAQ
How did Korean banking stocks perform compared to semiconductor stocks in July?
The KRX Bank Index rose 6.96% in July through July 8, while the KOSPI fell 12.73% during the same period. Major banking stocks including Shinhan Financial Group (up 11.31%) and KB Financial (up 7.89%) outperformed semiconductor leaders Samsung Electronics (down 11.76%) and SK Hynix (down 18.90%).
What drove the increase in Korean cosmetics stocks during the market decline?
Cosmetics stocks rallied on expectations of continued export growth from the K-beauty trend. First-half cosmetics exports increased 27.3% year-over-year to $7 billion according to the Ministry of Food and Drug Safety, reaching a record for the half-year period. On July 8, when KOSPI fell 5.35%, It's Hanbul rose 13.52% and Beauty Skin hit its daily limit up at 29.90%.
