Polarization deepening in stock market

By Yoon Ja-young

While the stock market soars to record highs, polarization is deepening among stocks. As the rally was led by a few large exporters, small investors who bet on other stocks are marginalized from the gains.

The main index KOSPI closed at 2,474.76 points Thursday, setting a new record, up 0.68 percent from the previous day.

Compared with the end of the last year when it closed at 2,026.46, it has risen over 22 percent. The total market cap of the main bourse stands at around 1,600 trillion won, which is around 22 percent more than early this year.

The rise, however, was mostly led by two semiconductor giants - Samsung Electronics and SK hynix - and a few conglomerate shares.

Samsung Electronics closed at 2.74 million won, which is its record high and up 0.29 percent from the previous day. The IT giant rose over 50 percent this year, while SK hynix nearly doubled.

Their portion in the total market cap also shows how they led the rally. They accounted for 26 percent of the KOSPI, up around 5 percentage points from the end of last year. The duo contributed to around half of the total market cap increase this year.

Also among those leading the rally are Samsung Electro-Mechanics and Samsung SDI, which doubled in stock prices this year. LG Innotek, NC Soft, LG Electronics, S-Oil and Hana Financial also rose over 50 percent.

While the top 100 stocks in the main KOSPI market recorded on average a 25 percent rise this year, surpassing the average rise of KOSPI, small stocks in KOSPI fell 3 percent on average. Among those categorized as small stocks, 294 fell compared with last year while only 151 rose. Among them, Wooridul Huebrain fell over 80 percent in value, and Hanchang, Dongkuk Industries and a dozen others had stock prices fall to half compared with last year.

While institutional investors and foreign investors are enjoying the rally, small investors who have a relatively bigger portion of small shares are thus marginalized. The junior KOSDAQ market, preferred by small investors, also rose only around 5 percent this year. Small investors see the price of Samsung Electronics as too burdensome for them. It takes an average monthly salary of a worker to buy only one share in Samsung Electronics.

Analysts also point out small investors have different investment pattern from institutional investors and foreign investors.

"Small investors tend to increase transactions only after the index has risen. They also have a high turnover ratio and tend to prefer short-term investments," said Jeong Da-i, a researcher at Meritz Securities, explaining why small investors often lose in the investment game.