"Interest Rate Hikes Have an Upside": Sectors Gaining 'an Average 12% Rise' as Semiconductors Stumble

Broad Market Correction Including Semiconductors Due to Rising Interest Rates
Banks and Insurers Benefit from Rate Hikes
Defensive Stocks Like Food and Cosmetics Also Soar
Since August, Binggrae Up 37%, Cosmax Up 59%

Despite a broader correction in the stock market due to rising market interest rates, financial stocks such as banks and insurers have been attracting attention as their prices have risen. Consumer staples, considered defensive stocks, including food and cosmetics companies, have also recently experienced a sharp increase in share prices, garnering significant interest.

Outstanding Performance of Financial Stocks Despite Broad Market Correction Amid Interest Rate Hikes

According to the Korea Exchange as of August 26, the insurance sector recorded the highest returns among domestic stock market industry groups over the past three months, from June to August 25, with an average return of 11.8%. The banking sector posted a 9.9% increase, ranking second after insurance. Consumer staples, including cosmetics and food companies such as Amorepacific, APR, and Samyang Foods, rose by 9.3%, coming in third. This is a remarkable performance compared to the same period, when the KOSPI fell 23.8% and major sectors such as semiconductors (-23.6%) and automobiles (-28.3%) also declined.

Securities analysts note that expectations of benefits to financial stocks such as banks and insurers, amid rising market interest rates, have already been reflected in share prices. In particular, the share prices of financial holding groups that own banks have outperformed, as higher interest rates widen the interest margin between loans and deposits. Even as the KOSPI dropped more than 20% from June, the share prices of the four major financial holding groups—KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group—rose by around 10% on average, outperforming the KOSPI by more than 30%.

Kim Jiyeong, a researcher at Kyobo Securities, said, "With expectations for a benchmark rate hike in the second half of this year, investor sentiment toward bank stocks as beneficiaries of interest rate increases will continue," adding, "Foreign investors have been rebalancing away from semiconductors, leading to increased interest in dividend and value stocks, which is a positive factor."

Financial holding companies have also benefited from a decline in the KRW-USD exchange rate. When the exchange rate falls, the Common Equity Tier 1 (CET1) capital ratio—a financial soundness indicator for holding companies—improves. The KRW-USD rate, which had exceeded 1,550 won last month, has recently plunged to the high 1,300-won range. Choi Jeongwook, a researcher at Hana Securities, noted, "If the current exchange rate is maintained through the end of the third quarter, the CET1 ratios of the major financial holding companies will show marked improvement," adding, "A stronger CET1 improves shareholder return capability and is therefore expected to be a positive factor for share prices."

Profitability Improvement Expected for Insurers

Rising interest rates are also positive for insurer stocks. During periods of interest rate hikes, the investment returns on bonds held by insurers improve, which tends to boost the companies’ profitability. In a highly volatile market environment, the potential for high dividend yields is also attractive for investors.

Kim Doha, a researcher at Hanwha Investment & Securities, explained, "The market interest rate, which has risen mainly on the long end, immediately impacts insurers’ net assets as a benchmark for asset and liability pricing, and gradually affects their investment profits and losses." He added, "It is positive for both the capital adequacy and profitability of insurance companies."

Consumer staples such as food and cosmetics, traditionally seen as defensive stocks, are also attracting attention. This month, Samyang Foods’ share price jumped about 27%, while Binggrae surged 37%. Both companies have seen balanced growth in domestic and export markets. Among cosmetics stocks, Cosmax rose 58.7%, APR 39.3%, Amorepacific 10.9%, and LG Household & Health Care 10.9%. Cosmax achieved its highest performance in company history in the second quarter on the back of robust exports, driving its share price sharply higher.

Han Yujeong, a researcher at Hanwha Investment & Securities, positively assessed, "The growth of K-beauty is now extending beyond a simple export boom to include market share gains and growth across the entire value chain," adding, "So far this year, the absolute amount of cosmetics exports has increased, and the growth regions are expanding from the United States to Europe and beyond."

This content was produced with the assistance of AI translation services.