After 1,200% rally, S. Korea’s star tech stocks need staying power

Six of the nation’s 10 best-performing stocks in 2021 are linked to the virtual universe or non-fungible tokens (NFTs), including Wemade Max Co, which has surged 1,500% as it seeks to be a blockchain game developer, and its top holder Wemade Co.(File pic: A screen displays a character of Wemade Co. Mir4 mobile game at the company's headquarters in Seongnam, South Korea, on Wednesday, Oct. 6, 2021. Based on blockchain technology, Mir4 allows online players to convert in-game assets into tradable crypto coins, while their avatars hunt and battle in the virtual world.)

SEOUL: For equity investors in South Korea, this was the year the metaverse arrived.

Six of the nation’s 10 best-performing stocks in 2021 are linked to the virtual universe or non-fungible tokens (NFTs), including Wemade Max Co, which has surged 1,500% as it seeks to be a blockchain game developer, and its top holder Wemade Co.

Virtual effects creator Giantstep Inc has soared over 1,200% since its March listing, as day traders piled into metaverse-tied stocks and exchange-traded products.

Looking ahead, the metaverse – a virtual universe that blends various aspects of digital technologies, and NFTs – which record data ownership on blockchains, are expected to be widely adopted among online game developers, content creators and even K-pop agencies.

Still, companies working in these state-of-the-art technology areas will need to show that their businesses are viable or face possible volatility.

“I’m bullish on the companies that are well-prepared for the NFT and metaverse businesses, but some may come under pressure if they can’t back up their words with action,” said Sung Jonghwa, an analyst at eBEST Investment & Securities Co.

The broader South Korean stock market turned less euphoric in the second half of the year, owing to a more hawkish central bank, Covid-19’s spread and curbs on margin trading.

The benchmark Kospi – the world’s top performer among major national gauges in 2020 – shot above 3,000 for the first time early in 2021 but has wiped out most of this year’s gains. Still, its advance of about 5% compares with a 3% drop in the MSCI Asia Pacific Index.

“We are seeing extreme polarisation in the stock market – if some stocks surged 10-fold, it means others lost in a big way,” said An Hyungjin, chief executive officer at Billionfold Asset Management Inc.

Retail investors this quarter began to sell equities for the first time since the pandemic started, as their favourites including 2020’s star performers Shin Poong Pharmaceutical Co and Celltrion Inc reversed direction and plunged.

Foreign funds are poised to be the largest net sellers of Kospi shares this year since the 2008 financial crisis. They’ve dumped about 50 trillion won (US$42bil or RM176.16bil) worth in 2020 and 2021 combined.

Here’s a look at some of the most significant stock moves in 2021.

The winners include Wemade Max Co (+1,499%). In November, Wemade Max surged by the daily limit after it announced a stock swap to make the fourth installment of the “Legend of Mir’s” developer Wemade Next Co a wholly-owned unit. The company now has a market cap of about US$615mil (RM2.59bil).

Giantstep Inc (+1,276%), listed on the country’s smaller Kosdaq in March, has surged amid the metaverse boom. The firm collaborated with K-pop agencies, including SM Entertainment Co to create virtual avatars of Korean music stars, and it’s also working with boy band BTS’s entertainment agency Hybe Co.

Wemade Co (+856%) was also buoyed by its pledge to put NFTs at the centre of its strategy to build its Wemix blockchain gaming platform. “It is one of the most highly anticipated companies with the best insight,” said eBEST analyst Sung.

Losers include Shin Poong Pharmaceutical (-74%), Celltrion (-40%) and SK Chemicals Co (-41%). — Bloomberg