In South Korea, Investors Snap Up
Stock in Telecom and Web Firms
By JANE L. LEE
Staff Reporter of THE WALL STREET JOURNAL
SEOUL, South Korea -- The nation's telecommunications and Internet stocks are suddenly going wild.
Since mid-October, the share prices of mobile-phone company SK Telecom, local-phone giant Korea Telecom Corp., and long-distance and Internet-service provider Dacom Corp. have all more than doubled. The broader Korea Composite Stock Price Index has risen 15% in that time, and analysts credit the tech boom for most of that gain.
"People are finally figuring out that valuations [of these companies] have been cheap on a regional basis," says Nam Park, head of Hyundai Securities' team for Kosdaq, a Korean stock exchange modeled after the U.S.'s Nasdaq Stock Market. Kosdaq's tech-heavy venture-business index has nearly tripled in the past two months. On Wednesday, it jumped 4.4%, or 20.71 points, to 486.95.
PC 'Game Rooms'
Analysts say the appetite for the stocks is part of the global interest in anything Internet-related. But the surge, they say, could also be an indicator that Korea's markets and economy may be shifting from the tradition of being monopolized by the chaebols, or mammoth business empires.
Korea's growth in the Internet business has been among the fastest in the world. In the past few years, more than 13,000 personal-computer "game rooms" have opened across the country, where there were none before, says Douglas Kim at ING Baring Securities. Game rooms are essentially giant Internet-access providers, each with 30 to 40 computers and high-speed Internet access. Mr. Kim estimates that the number of Korean Internet users is around 6.5 million, more than double the 3.1 million users a year ago.
Korea is also coming out of one of its worst recessions and is starting to catch its breath from the shock of the near-default of Daewoo Group, one of its largest chaebols, says Koh Wonjong, head of research at ABN Amro Asia. South Korean markets were rocked by Daewoo's troubles, which broke in mid-July, but have stabilized in the past few months. In addition, the government has offered support for start-up venture firms with tax breaks and other incentives, and has taken steps to curb the conglomerates' once-unlimited access to capital.
One trigger to the boom may be November's first-ever listing of a Korean company on the Nasdaq Stock Market. About three weeks ago, high-speed Internet-service provider Korea Thrunet Co. listed at $18; Wednesday morning it was trading at $70.75.
SK Telecom Soars
One of the most prominent big gainers this year is SK Telecom, which hit a high on the main Korean Stock Exchange of 2,990,000 won ($2,623) a share on Tuesday, nearly five times its price at the beginning of the year. On Wednesday, it slipped back 4.7%, or 140,000 won, to 2,850,000 won.
Makers of tech-related goods such as chips and flat screens have also benefited. Samsung Electronics Co.'s share price has risen more than 50% since mid-October to close Wednesday at 273,500 won on the main exchange.
Analysts say much of the rise on the main index, however, has been fueled by the recent surge on the three-year-old Kosdaq. Daum Communications Corp., an Internet portal service company and software developer that started trading Nov. 11 on Kosdaq at 10,000 won, has hit its 12% daily limit increase every trading day since. On Wednesday it closed at 94,700 won. SEROM Technology Inc., which produces equipment and software for the Internet and provides free Internet telephone service, started trading at 23,000 won on Aug. 13 and closed at 131,500 won on Wednesday.
While observers debate whether this is a bubble or not, many expect the surge to continue. "It will be a while until people can tell the apples from the oranges among these firms," says David Kim, head of international business for Seoul Securities. "Until then, the expectations for these firms will drive up the prices."
Write to Jane L. Lee at jane.lee@awsj.com |
