S. Korean stocks undervalued to 2008 financial crisis level: PER data

2019.01.07 09:20:07 | 2019.01.07 09:25:57

이미지 확대
South Korean stocks listed on the country’s main stock bourse are trading cheap with the price-to-earnings ratio (PER) of the main Korea Composite Stock Price Index (Kospi) falling to the financial crisis level a decade ago, data showed Sunday.

According to data by Korea Exchange on Sunday, the Kospi was traded at a PER of 9.36x on Jan. 3 when it dipped below the psychologically important 2,000 level for the first time in two months to end at 1,993.7, the lowest since Dec. 7, 2016. The selloff was triggered by fears of a faster slowdown in the Chinese economy, the world’s second-biggest economy, as well as poorer-than-expected Apple’s earnings and bleak outlook.

The Kospi PER, which refers to a share price relative to per-share earnings, on Thursday hit the lowest in almost 10 years after it reached 9.20x on April 1, 2009.

The Kospi’s price-to-book ratio (PBR), which compares a market value with book value by dividing price per share by book value per share, also came at 0.85x, the lowest since Nov. 25, 2008 when it fell to 0.82x.

Both PBR and PER, which divides market value per share by earnings per share, are used to gauge whether a stock is overvalued or undervalued. A higher PER suggests stocks may be overvalued as the share price is relatively high compared to its earnings and vice versa when lower. A lower PBR also suggests shares are undervalued.

On Jan. 3, the PER of Samsung Electronics Co., Korea’s bellwether by market capitalization, stood at 6.26x and PBR 1.34x. The company’s PER was even lower the Kospi PER while PBR higher. The PER of SK Hynix Inc., the second-largest stock by market capitalization, was 3.83x while PBR 1.24x.

The falling of PER and PBR to the financial crisis level comes after the prices of Kospi-listed stocks plunged faster than the companies’ earnings and net asset. The Kospi PER once recovered to 24.78x on April 25, 2010, but now it hovers below half that level.

By Jung Hee-young and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]