As the KOSPI experienced sharp volatility and a steep downturn, banking stocks relatively trimmed their losses, acting as defensive plays. However, analysts suggest that if market instability persists, sustaining this upward momentum may be difficult.

According to the Korea Exchange on the 20th, the KRX Banks Index—comprising major financial holding companies and banking stocks listed on the domestic stock market—dropped 2.70%, moving from 1,577.12 on the 8th to 1,534.44 at today's close. Compared to the KOSPI, which plunged 16.19% from 6,625.93 to 5,552.74 over the same period, banking stocks demonstrated a relatively resilient defense of their share prices amidst a bearish market.

The declines among individual components within the KRX Banks Index were also moderate. KB Financial Group (-1.17%), Woori Financial Group (-1.70%), and Hana Financial Group (-2.01%) saw only slight dips. Meanwhile, KakaoBank (4.01%) and Industrial Bank of Korea (IBK) (1.27%) actually posted gains. Shinhan Financial Group, however, fell sharply by 7.74%, sliding from 99,500 KRW on the 8th to 91,800 KRW today. This underperformance relative to the sector is interpreted as the negative impact of potential additional capital injections stemming from its acquisition of a stake in Lotte Non-Life Insurance, which weighed on investor sentiment.

This trend is attributed to selling pressure spreading across large-cap semiconductor stocks, fueled by skepticism over artificial intelligence (AI) investment profitability and caution regarding U.S. big tech earnings. Conversely, banking stocks defended their share price floors thanks to their dividend attractiveness and stable earnings structure. As market volatility heightens, investors' attention gravitated toward banking stocks, which excel in economic defense, over growth stocks laden with uncertainty.

Notably, banking stocks are frequently cited as prime beneficiaries during periods of monetary tightening. Currently, global central banks—including the Bank of Korea and the U.S. Federal Reserve—have officially declared the resumption of interest rate hikes. When interest rates rise, loan rates climb faster than funding costs such as deposits and savings, widening the loan-deposit spread (the difference between lending and deposit rates). Consequently, Net Interest Margin (NIM), a core profitability indicator, expands, generating effects such as improved Return on Equity (ROE) and increased interest income.

Kim Jae-woo, a researcher at Samsung Securities, stated, "Banking stocks recorded relatively favorable returns compared to the KOSPI. Amid inflation and interest rates emerging as reasons for market adjustments, the fact that rising interest rates trigger wider NIMs and interest income growth—thereby creating solid earnings—acted positively on investor sentiment."

However, projections indicate that if the current stock market downturn persists, even defensive banking stocks will likely take a hit. This is because a deterioration in retail investor supply-demand conditions and worsening investor sentiment, triggered by expanded future losses, would also spell bad news for banking stocks.

Currently, securities firms evaluate the anticipated KOSPI band to be within the 5,100–5,500 range. Some analyses suggest that if the short-term downturn continues, panic selling could drag the index down to the 4,800 level. Investment industry insiders note that if U.S. big tech earnings releases—kicking off with Meta this week—fail to provide conviction regarding AI profitability, a deepening of the downturn could recur.

Choi Jung-wook, a researcher at Hana Securities, emphasized, "The defensive appeal resulting from banking stocks' relative outperformance is merely temporary. If the market decline continues, it won't just be a matter of banking stocks' Book Value Per Share (BPS) or Earnings Per Share (EPS); multiples are bound to fall simultaneously. This is why we cannot simply celebrate the rise of banking stocks."

He added, "Ultimately, the directional movement of bank stock prices hinges on market stabilization. With third-quarter NIM contractions and earnings driven largely by one-off factors, short-term momentum is limited. Additionally, potential short-term issues could come into play, such as whether fines related to Hong Kong-linked Equity-Linked Securities (ELS) will be further reduced at the end of this month, and whether the Fair Trade Commission will impose penalties over alleged bid-rigging by Primary Dealers (PDs) in government bonds."

[ⓒ Global Economic Times. 무단전재-재배포 금지]