Kumho Tire’s stock price soared through the roof… What’s the reason?
Kumho Tire’s stock price has shown significant volatility since last week. The direct cause was the so-called ‘Honam semiconductor issue.’ As expectations grew that the government would unveil a blueprint to foster the Gwangju and South Jeolla regions as the second semiconductor production hub after the Seoul metropolitan area, investors’ attention focused on region-based companies and firms holding related land sites.
This trend is not simply due to Kumho Tire’s tire business performance. Moreover, Kumho Tire is neither a semiconductor company nor a semiconductor equipment or materials company. Nevertheless, the stock price moved because of the company’s connection to Gwangju City. Kumho Tire faces the issue of relocating its Gwangju plant, and has drawn market attention over the Bitgreen National Industrial Complex, which has been mentioned as a candidate site for the relocation, and the use of the existing Gwangju plant site. As expectations for the creation of a Honam semiconductor cluster were added to this, investors began to view Kumho Tire as a ‘regional beneficiary stock.’
The stock price movement was steep. On the 26th, Kumho Tire recorded a double-digit increase compared to the previous trading day. Compared to usual trading volume, this was an unusual level. Then on the 29th, strong buying pressure came in from early trading. It briefly surpassed the 5,800 won range during the session. However, after the government announcement became more concrete, the gains narrowed and the stock price movement calmed down.
The government’s semiconductor-related plan announced on the 29th was sufficient in scale to attract market attention. The reason Kumho Tire was included in this trend is due to the Gwangju plant site and relocation issue. Kumho Tire faces the task of relocating its Gwangju plant. For the relocation to become a reality, the construction of a new plant, disposal of the existing site, change of use, and sale negotiations must all be interlinked. If land values and development expectations in the Gwangju area rise during the process of building the semiconductor cluster, Kumho Tire’s existing site issue could also enter a new phase – this is interpreted as being reflected in the stock price.
Of course, Kumho Tire’s own performance is not bad. Recent profitability improvement trends have continued, and the tire industry also has room for profit improvement depending on cost stability and pricing power. However, it is reasonable to view that the direct cause of the stock price surge in a short period was the Honam semiconductor cluster issue rather than performance.
In particular, the fact that the stock price became quiet again after the announcement is an important point. In a phase of growing expectations, buying pressure builds up even from uncertain rumors and interpretations alone. But once the actual announcement comes out, investors begin to examine whether there are concrete benefits. This means that realistic questions follow, such as whether Kumho Tire is a company directly connected to semiconductor production facilities, how quickly the Gwangju plant site issue can be resolved, and whether relocation costs and change-of-use issues can be addressed.
From Kumho Tire’s perspective, this issue is not meaningless. Rather, the fact that the Gwangju plant relocation issue, land value, and the company’s earnings capacity – which had not received much market attention – have been brought back into the spotlight acts as a positive factor. Above all, discussions on Kumho Tire’s plant relocation and use of the existing site gain more momentum than before.
