A rendering of SK Group's semiconductor cluster in Yongin, Gyeonggi Province / Courtesy of SK Group

Expectations that Samsung Electronics and SK hynix will invest in massive chip plant projects in Gwangju and the surrounding South Jeolla Province have triggered a rally in various companies headquartered in the region.

The rally has been fueled by expectations that the purported large-scale chip plants would spur demand for roads, transportation networks, housing and other public infrastructure needed to support surrounding cities. However, concerns are also growing over speculative buying, as shares of companies with little apparent connection to the semiconductor industry have also fluctuated on the news.

Listed construction firms mostly active in Gwangju and South Jeolla enjoyed the most notable spike.

Kumho E&C hit the daily 30 percent trading limit on Friday after surging 29.9 percent on Wednesday, nearly doubling its share price in just one week. Namhwa Construction, based in Hwasun County of the province, jumped 29.96 percent on Friday.

Industry officials said the rally appears to reflect expectations that the companies would benefit from increased demand for surrounding infrastructure, rather than directly participating in the construction of the chip plants. They said construction firms with an established presence and execution capabilities in the region are likely to be among the biggest beneficiaries.

The rally came after Kim Yong-beom, presidential chief of staff for policy, said Wednesday that a new semiconductor cluster plan involving Samsung Electronics and SK hynix is nearly complete. He added Friday that the scale of the investment would be "unprecedented." The plan is expected to be announced Monday.

Gwangju Shinsegae, which operates a Shinsegae department store and the U-Square bus terminal in the city, saw its shares jump 29.98 percent Friday to close at 52,900 won ($34.44). The rally reflected expectations that a large semiconductor cluster would boost the local economy and consumer spending. Gwangju Shinsegae is a subsidiary of Shinsegae Group.

Kumho Tire's manufacturing plant in Gwangju Metropolitan City's Gwangsan District / Korea Times file

Part of the rally was driven by outdated information or unfounded claims linking companies to the region.

Source: Korea Times News