Game stocks plunge amid interest rate hikes

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By Anna J. Park

The major game stocks nosedived at closing on Monday, as concerns over a global economic recession continue. Kakao Games, the largest market cap game company listed on the Kosdaq, ended Monday’s session with a fall of 10.14 percent, finishing at 50,500 won ($39.10). Monday’s closing price is the game company’s new 52-week low price.

Wemade, another major game company listed on the tech-heavy Kosdaq, also fell by 5.63 percent on Monday, finishing at 65,400 won.

Pearl Abyss also logged a decline of 4.86 percent at Monday’s closing, finishing at 52,900 won. The closing price is the game company’s 52-week low as well. Com2us Holdings also slipped to 50,600 won at Monday’s closing, a 5.95-percent fall.

Larger game companies, like NCSoft and Krafton, which are listed on the main benchmark Kospi, saw a relatively better performance on Monday. NCSoft logged a 0.38-percent increase at closing, while Krafton finished at 259,000 won, which is a 1.33-percent fall.

Market analysts say the general decline in game stocks’ prices this year has to do with macroeconomic factors that have turned unfavorable to the companies. The game industry enjoyed a boom last year with the market’s overvaluation of the companies, thanks to pandemic-led growth potential and expectations over new games amid a low interest rate.

Yet the external environment has been shifting significantly this year, with the firms’ future corporate valuations discounted further amid interest rate increases. Interest rate hikes hit growth industries like big tech and IT-based companies harder, as their corporate valuations rely more on their future potential compared to other sectors like consumer staples.

Although game companies are not likely to be a leading sector of the local stock market any time soon, analysts advise investors to invest in firms that generate solid revenue regardless of external factors.

“It is still valid to increase the weight of game companies that are forecast to post an increase in their annual revenues, regardless of external factors,” said Kim So-hye, an analyst at Hanwha Investment & Securities.