Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Will Korean stock markets continue rally throughout next year?
A monitor located in the lobby of the Seoul office building of the Korea Exchange (KRX) shows the KOSPI's closing price of 2,700.93, Tuesday. / Courtesy of KRX AAA
By Anna J. Park
Despite diverged views, market watchers generally have positive outlook on stock markets
By Anna J. Park
Despite a resurging number of COVID-19 patients, the country's stock markets continued their strong rallies in recent trading sessions. The KOSPI kept breaking its record highs for five consecutive days, reaching 2,745.44 points at Monday's closing.
However, the five-day winning streak by Korea's benchmark index ended on Tuesday, as the stock market fell to 2,700.93 at its closing, down by 1.62 percent from the previous session. The tech-heavy Kosdaq also shrank to 906.84 points at Monday's closing, a fall by 2.16 percent from Monday's closing, which wrapped up an eight-day winning streak at the Kosdaq. The won-dollar exchange, meanwhile, stood at 1,085.4, up by 3.3 won from the previous session.
Tuesday's fall is attributed to net selling worth 845.7 billion won ($778 million) by foreign investors and 270.2 billion won by institutional investors, while retail investors alone net purchased 1.124 trillion won worth of stocks at Tuesday's trading session.
Most large-cap blue-chip companies' prices were slightly dented on Tuesday, including Samsung Electronics, SK hynix, Naver and Hyundai Motor, which fell by 1.65 percent, 2.54 percent, 1.55 percent and 3.62 percent, respectively. Bio- and medicine-related firms Samsung Biologics also fell by 5.91 percent and Celltrion dropped by 13.26 percent on Tuesday.
Against this backdrop, Vice Minister of Economy and Finance Kim Yong-beom warned of a possible bubble in the asset market, once vaccine development and local distribution are in full swing, urging caution in market participants.
“Once local and global economies seem to be riding on a fast track to recovery with full-on vaccine distribution, there's a possibility that asset prices could jointly rise further,” the minister said at a meeting held on Tuesday morning with key officials from the financial authorities, including the Financial Supervisory Service (FSS) and Financial Services Commission (FSC).
However, while some market watchers are more cautious about the current boom in the stock markets, many others expect the upward trend to continue based on Korean businesses' solid export recovery prospects for next year with upcoming vaccine distribution alongside ample liquidity with low interest rates and a strengthened won. Ever-tightened regulations on the country's real estate market are also continuing to send investors' money into the stock markets.
“The KOSPI's bullish moves have been strong lately, yet the volatility level remains within the realm of the average of the past,” explained Huh Jae-hwan, strategist at Eugene Investment.
“The key U.S. interest rates are on their way for a further rise, but it's still within the control of the U.S. Federal Reserve. Some of the Chinese industry's bankruptcy news is out there, but it's not yet a threat to the system,” the analyst said, adding that the semiconductor sector that's been rallying lately could be regarded as finding an appropriate balance with other sectors, and it's not the point that danger factors will be reflected soon enough.
Another market watcher pointed out there is still more room for stock markets' upward movements, considering the full-on vaccine impacts by the end of the year.
“Despite the growing burden of the high level of stock prices compared to companies' fundamentals, the main cause of the recent rally has been foreign investors' strong buying. Given the continued positive impacts of vaccine development on the markets, it seems a further rise in the stock market indexes could be possible,” said Ahn So-eun, an analyst at IBK Investment & Securities.