Amid a global surge in long-term government bond yields, investors are turning their attention to high-ROA stocks with strong asset productivity and no reliance on financial leverage. In South Korea, 16 companies with market capitalizations of at least KRW 1 trillion and ROA above 20% outperformed the market average in August.
As long-term government bond yields around the world continue to rise, companies with strong asset productivity and no reliance on financial leverage are drawing investors' attention. The U.S. 10-year Treasury yield remained elevated at 4.812%, while the 30-year yield stood at 5.290%, and Japan's 10-year government bond yield broke above 3%. Against this backdrop, high-ROA companies are gaining prominence.
In the South Korean market, 16 companies were identified that met all of the following criteria: a market capitalization of at least KRW 1 trillion, ROA above 20%, profitability in each of the past 4 quarters, and a debt ratio of no more than 101%. The leading high-ROA stocks included SK Square, SK hynix, APR, Oscotec, Dalba Global, Jeju Semiconductor, SK Biopharmaceuticals and Alteogen. Hanmi Semiconductor and others also exceeded the 20% level.
These high-ROA stocks outperformed the broader market in August. The average stock return of the 9 KOSPI stocks was 9.80%, well above the 3.40% gain for the KOSPI as a whole. The 7 KOSDAQ stocks also rose by an average of 21.78%, with the group spanning a range of industries from cosmetics to semiconductors, biotechnology and power equipment.
Market participants say that, during periods of rising interest rates, high-ROE companies dependent on financial leverage may see earnings pressured by higher funding costs. They recommend selecting high-ROA companies that generate profits through the productivity of their assets themselves. Price volatility in long-term bonds, including U.S. Treasury ETFs, is also affecting the investment environment.