Korean bank stocks outperformed in July as the KOSPI fell approximately 14%, with Shinhan Financial Group rising 9.60% from 95,800 won to 105,000 won during the month. The rally occurred amid heightened volatility in semiconductor stocks, as investors sought defensive positions with stable earnings and dividend expectations. Banks are classified as defensive stocks due to relatively stable cash flows and dividend policies, contrasting with the sharp declines in Samsung Electronics and SK Hynix that drove the broader index lower.
Korean Bank Stocks Post Gains During July KOSPI Decline
According to Korea Exchange data, Shinhan Financial Group rose 9.60% in July, while KB Financial gained 7.80%, Hana Financial Group advanced 6.98%, and Woori Financial Group increased 3.62%. The KOSPI index declined 13.97% during the same period. Banks benefit from interest rate changes and maintain relatively stable cash flows, leading to their classification as defensive stocks. "Fatigue from high volatility in semiconductor stocks and the possibility of a rate hike support the upward momentum in bank stocks," said Eun Kyung-wan, researcher at Shinhan Investment Securities.
Analysts Forecast 5.6 Trillion Won Q2 Net Profit for Eight Banks
According to Shinhan Investment Securities, the combined net profit attributable to controlling shareholders for eight banks (KB, Hana, Woori, IBK, BNK, iM, JB, Kakao) in Q2 is expected to reach 5.6 trillion won, meeting market expectations. "We expect an upward breakthrough based on improved return on equity (ROE)," said Eun Kyung-wan. Bank stocks' price-to-book ratio (PBR) fell to 0.70x, reducing valuation concerns compared to recent highs.
Shareholder Return Plans Expected with Q2 Earnings
Financial institutions are likely to announce interim dividend and share buyback-cancellation plans alongside Q2 earnings reports. "Expectations for banks' aggressive shareholder returns remain valid based on improved common equity tier 1 (CET-1) ratios," said Cho A-hae, researcher at Meritz Securities. Shareholder return expectations support bank stock valuations.
High Dividend ETF Records 7.34% Weekly Gain
According to KOSCOM ETF Check, the RISE 200 High Dividend Covered Call ATM ETF recorded a 7.34% return over one week, ranking first among domestic equity ETFs (excluding leveraged and inverse products). The ETF buys KOSPI 200 high dividend index stocks and sells KOSPI 200 call options to pursue dividend income and option premiums. Its largest holding is Korean won deposits at 14.68%, followed by Misto Holdings (2.84%), DB Insurance (2.71%), Samsung Card (2.70%), and Industrial Bank of Korea (2.60%).
FAQ
What happened to Korean bank stocks in July?
Korean bank stocks rose during July while the KOSPI fell approximately 14%. Shinhan Financial Group gained 9.60% from 95,800 won to 105,000 won, KB Financial rose 7.80%, Hana Financial Group advanced 6.98%, and Woori Financial Group increased 3.62%.
Why did analysts expect strong Q2 bank earnings?
Shinhan Investment Securities forecast that eight Korean banks would report combined Q2 net profit of 5.6 trillion won, meeting market expectations based on improved return on equity (ROE). Analysts cited improved common equity tier 1 (CET-1) ratios as supporting expectations for aggressive shareholder returns.
