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Coronavirus

Kakao tops Hyundai in market cap as pandemic shakes up Korea Inc.

Demand for digital services gives boost to internet companies

Internet companies have thrived amid the coronavirus outbreak, while more traditional companies have struggled. (Source photo by Getty Images)

SEOUL -- The coronavirus pandemic has shaken up South Korea's ranking of biggest companies by market cap as technology companies rally thanks to increasing demand for contact-free life, while traditional manufacturers are struggling to cope with the sudden change.

Internet company Kakao, well-known for its chat app KakaoTalk, ranked ninth Monday among Kospi constituents by market capitalization, with 23.1 trillion won ($18.6 billion), while Hyundai Motor, the country's largest automaker, dropped to 11th, with 20.4 trillion won in market cap. Kakao was the 22nd at the end of last year, while Hyundai Motor was the sixth at the time. Kakao's share were up over 8% during afternoon trading on Monday. 

Naver, South Korea's No. 1 internet company and the parent of popular chat app operator Line Corp., came fourth with 39.3 trillion won of market cap, solidifying its leading status in the industry. NCSoft, an online game maker, jumped to the 13th, with 18.2 trillion won, moving ahead of the nation's largest steelmaker, Posco, which ranked 17th with 14.9 trillion won.

Analysts say that the top three internet companies will continue to grow in the second half of this year as they benefit from rising demand during the coronavirus pandemic.

"Investment sentiment for internet/game industry is improving as the market's interest for un-contact services are rising," said Hwang Seung-taek, an analyst at Hana Financial Investment. "Their business fundamental, focused on ads, commerce and contents, is expected to have robust improvement despite volatile economic circumstances."

Demand for a wide range of online services -- from remote learning technology to digital payments -- has surged in South Korea as the country introduced social distancing and other measures to deal with the outbreak of the coronavirus. Samsung Electronics, the country's electronics king, maintained its firm lead in the market cap rankings, with a value of 291.6 trillion won. The company has seen growing demand for server chips thank to the sudden increase in teleworking in the country.

In contrast, Hyundai Motor's April sales tumbled 56.9% on the year to 159,000 units. The automaker was hit hard by production disruptions around the world and weaker demand caused by the COVID-19. In particular, its sales outside of South Korea plunged 70.4% during the same period, adding to worries at the troubled company.

The internet companies, meanwhile, are using their strong platforms and user bases to expand into finance, commerce and mobility. Kakao said last week that it will connect user accounts of its internet banking and easy digital payment units.

Biomedicine stocks also enjoyed a market boost thanks to expectations for developing new vaccines to combat the coronavirus. Samsung Biologics ranked third with a 41.8 trillion won market cap, while its local rival Celltrion came in sixth with 29 trillion won. Samsung Biologics said on Friday that it has signed a 184.2 billion won contract with a U.S. drugmaker to produce drugs for the company. Celltrion said it is gearing up to develop a coronavirus vaccine.

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