The "emperor stocks" that made a dazzling debut by topping 1 million won per share amid a bull market are stepping down from the throne one after another, unable to withstand the plunging market. Five remained as of the previous day, but Samsung Electro-Mechanics tumbled more than 14% on the 30th alone, cutting the number of emperor stocks back to four. This is the opposite of the scene just two months earlier, when 12 stocks made the list and even the need for stock splits was being discussed.
According to the Korea Exchange on the 30th, Samsung Electro-Mechanics closed at 879,000 won, down 150,000 won (14.58%) from the previous trading day. Although it had barely held the 1 million won line with a previous close of 1.025 million won, it dropped off the emperor stock list in a single day.
As a result, based on the closing price that day, only four stocks trade above 1 million won: Hyosung Heavy Industries (1.894 million won), Samsung Biologics (1.527 million won), SK hynix (1.322 million won), and Samyang Foods (1.243 million won). Among the stocks that newly rose to emperor status during this year's market rally, SK hynix is the only one that has held its place until now.
Rose From 4 to 12, Then Back to Square One in Two Months
At the beginning of this year, there were four emperor stocks: Hyosung Heavy Industries, Samsung Biologics, Korea Zinc, and Samyang Foods. Subsequently, as artificial intelligence (AI) semiconductors, power equipment, and defense stocks led the market rally, high-priced stocks increased rapidly.
On May 26, when the KOSPI rose to 8047.51, eight new stocks crossed the 1 million won line: SK hynix, Doosan, Samsung Electro-Mechanics, Hanwha Aerospace, SK Square, HD Hyundai Electric, LG Innotek, and Taekwang Industrial. At that time, the number of emperor stocks swelled to a total of 12.
However, as the market subsequently entered a sharp correction, Doosan, Hanwha Aerospace, SK Square, HD Hyundai Electric, LG Innotek, and Taekwang Industrial fell below 1 million won one after another. Korea Zinc, which had been an emperor stock since the start of the year, was also removed from the list, and even Samsung Electro-Mechanics, which had held on until the last, dropped off that day.
The KOSPI jumped 86.7% from 4309.63 at the start of the year to May 26, but quickly gave back those gains afterward. On the 29th, it closed at 5663.24, down 360.42 points (5.98%) in a single day, and it also finished at 5593.56 on the 30th, down 69.68 points (1.23%). It rebounded to as high as 5976.82 at one point during the session but failed to sustain the upward momentum.
The KOSDAQ also closed at 644.78 that day, down 17.90 points (2.70%). Individual investors net sold 1.429 trillion won, while foreigners and institutions net bought 1.3402 trillion won and 66.4 billion won worth, respectively.
Stock Splits Once Discussed, But Accessibility Debate Fades Below the Surface
An increase in emperor stocks is usually seen as a symbol of a bull market. It signifies that a company's earnings and growth expectations are reflected in its share price. On the other hand, when the per-share price exceeds 1 million won, it acts as a barrier to entry for small investors.
When emperor stocks increased to 12 in May, the market also discussed the possibility of stock splits by high-priced companies. A stock split is a method of increasing the number of issued shares to lower the per-share price without changing the corporate value. It is considered a representative shareholder-friendly policy in that it can improve accessibility for individual investors and stimulate trading.
Samsung Electronics lowered its share price from the 2 million won range to the 50,000 won level through a 50-to-1 stock split in 2018. Afterward, as the inflow of individual investors greatly increased, it established itself as a "people's stock." Naver and Kakao have also lowered the burden of high stock prices through stock splits in the past.
However, as emperor stocks disappear rapidly, the possibility that stock split discussions will lose steam has grown. Hyosung Heavy Industries, Korea's highest-priced stock, has maintained its position of focusing on expanding orders and enhancing mid- to long-term corporate value rather than technical measures such as stock splits. Hyosung Heavy Industries hit its 52-week high of 4.742 million won on May 7 and closed at 1.834 million won that day.
Plunge Not Halted Even by Strong Earnings; Leverage Aftershock Cited
Although the earnings of large semiconductor stocks such as Samsung Electronics and SK hynix are holding up, it was not enough to reverse the overall market's investor sentiment. Analysts note that even though Samsung Electronics announced strong second-quarter earnings that day, the KOSPI failed to rebound, indicating that supply-demand instability and fatigue from the sharp rally are having a stronger effect than corporate earnings.
The fact that U.S. stock markets all declined overnight added to the burden. The Dow Jones Industrial Average fell 2.2%, the Standard & Poor's (S&P) 500 index fell 1.5%, and the Nasdaq index fell 1.7%. Micron, a semiconductor stock, plunged 10.1%.
In the market, one of the causes cited for the increased volatility is that funds concentrated in certain large-cap stocks after single-stock leveraged exchange-traded funds (ETFs) were launched in May. These products track twice the daily return of the underlying stock, so gains grow larger when the stock rises, but losses also expand twofold when it falls.
The process in which asset managers conduct daily rebalancing trades around the market close to maintain the target multiple can also amplify the rise and fall of stock prices. Analysts say this supply-demand structure also influenced the reason why the large-cap stocks newly incorporated as emperor stocks recorded particularly large declines during the correction.
This month, the KOSPI's decline rate reaches 33%. Given that monthly plunges of more than 20% typically occur when major negative events such as a financial crisis or currency crisis arise, some evaluate the scale of this correction as unusual.
Whether emperor stocks will increase again depends on whether the market rebounds. With the U.S. Federal Reserve (Fed) having frozen rates, the Bank of Korea's benchmark rate decision, the Fed's September monetary policy, and whether semiconductor stock prices recover are cited as major variables. Analysts say the number of emperor stocks, which shrank from 12 to 4 in just two months, is fully reflecting the recent sharp temperature change in the market.
