Why Do You Feel Left Out of Ongoing Recovery?
By Yoon Ja-young
Staff Reporter
Stocks and asset prices are recovering, but the recovery is not being felt by most of investors. This is because, according to experts, a few blue chips are leading the current rebound.
Recent statistics show that asset prices have returned to the level before the collapse of Lehman Brothers last September that triggered the global slump.
The main index KOSPI, for example, closed at 1,440.10 on Friday, nearing the 1,474.24 it marked last August.
Equity funds also recovered to the level before the tumult of the global financial crisis. Equity funds investing in the domestic stock market marked a 1.39-percent investment return during the period, and the average housing prices index by Kookmin Bank is also nearing the level seen in mid August last year.
There are a number of reasons why investors don't feel the effects.
Foremost, recovery is still far away for investors who joined at the peak. The main index KOSPI has risen by over 50 percent since hitting the bottom, 892.16, recorded on Oct. 27, but few investors were lucky enough to enter the stock market at the bottom. Most investors joined the stock market before the outburst of the global financial crisis.
The same goes true for equity funds. Mirae Asset's ``Insight Fund,'' for example, recorded a 40-percent investment return in the first half of this year, but most of the investors of the fund are far from enjoying the reap ― many put their money into the fund before October 2007, when the fund was launched amid an overly heated global asset market, with KOSPI hovering above 2,000. Since then, the fund has sustained an investment loss of over 30 percent, which means most of the investors are still in the minus territory.
Moreover, the rise of the overall index doesn't mean that all stocks are headed up ― the soar was led by a few winners while many were marginalized from the rally. Samsung Electronics, for example, closed at 677,000 won last Friday, rising near 30 percent from 516,000 won recorded around the end of August, before the collapse of Lehman Brothers. POSCO, another powerhouse in Korean industry, meanwhile, fell slightly during the period.
Moreover, statistics show that small investors don't have the insight to choose the right stocks. According to the Korea Exchange, the country's stock market operator, the top 50 stocks bought most by small investors rose by a mere 15 percent in the first half this year, while the top 50 picks by institutional investors reaped on average a 76-percent investment return. Near half, or twenty-two, of the top 50 picks by small investors saw share prices fall, implying that more than a few investors are still losing money, even in the bull market.
The news of a housing price recovery is not being felt significantly for many, as the recent rise is being led by some old apartments in southern Seoul that are under the reconstruction plan. These apartments are soaring upon the expectation that they will be reconstructed into new, luxurious homes as the government is considering easing restrictions on reconstruction of apartments. The 50-square-meter Jugong Apartment in Gaepo-dong, for example, traded at 1.1 billion won in June, recovered to the peak it recorded in 2006 amid the housing bubble.
However, apartment prices in Seoul rose only 2 percent on average during the first half, far below the 40-percent rise of these old apartments under reconstruction schedule. Only eight among the 25 districts saw apartment prices rise during the period, which means homeowners in most parts of Seoul would not enjoy the asset boom.
Nationwide, the number of new apartments piled up an unsold total of over 160,000 as of April, with over 80 percent of them located in provinces.