By Park Hyong-ki and Yoon Ja-young
Staff Reporters
Seoul bourse surged past the historical 2000-point mark after a sovereign rating upgrade by Moody's Investor Service, meaning that it has joined the ranks of the developed markets, analysts said.
The benchmark KOSPI rose 11.96 percent, or 0.6 percent, at an all-time high of 2004.22. The tech-heavy KOSDAQ closed up 6.13, or 0.75 percent, at 819.60. The combined market capitalization of KOSPI and KOSDAQ reached 1,104 trillion won.
Analysts said the rating upgrade prompted the key index to break past the 2000 barrier. Moody's lifted its rating one notch to ``A2,'' citing Korea's ``track record of fiscal prudence, favorable macroeconomic performance and the containment of geopolitical risks.''
Also contributing to the bullish gains was a stronger-than-expected economic growth rate of 4.9 percent year-on-year in the second quarter. The Bank of Korea initially expected its quarterly growth rate to record 4.7 percent.
``But above all, retail investors played a major role in the stock market, offsetting foreign investors' massive sell-offs,'' said Kang Moon-sung, an analyst at Korea Investment & Securities. ``Their expectations about the economy and corporate earnings are turning more positive.''
Kang added that surpassing the 2000 mark shows that the stock market is gaining close to being a ``valuable'' market.
On Wednesday, foreign investors unloaded shares worth 666 billion won in total, the fifth biggest daily net selling.
Lee Sun-yup, an analyst at Good Morning Shinhan Securities, noted that China's economic growth of 11.9 percent in the second quarter further pumped up Korea's smokestack stocks such as shipbuilding, chemical and machinery. He said that China's rapid growth is benefiting such stocks, not raising concerns about China posting ``too much heat.''
``Breaking past the 2000-mark is significant as it shows that investors are into stocks for long-term investments rather than for speculative, short-term gains,'' said Lee.
Having started from 100 points in 1980, the index grew 20 times in 27 years. The market cap of KOSPI and the junior tech-loaded KOSDAQ surpassed 1,100 trillion won, compared with 10 billion won in 1963.
KOSPI first breached 1,000 points on March 31, 1989 but continued increases and falls, breaking 1,000 points again in 1994 and 1999 but lacking the boost to continue the rise.
The real rally started after it broke 1,000 points again in July 2005. It has accelerated pace even further since breaching 1,500 points in April this year. It took only seven trading days for KOSPI to reach 2,000 points after surpassing 1,900 points.
Analysts expect the rally to continue.
``It's really significant for the KOSPI to breach 2,000 points. The re-rating will continue, given strong fundamentals and steady flows of funds into the market,'' said So Jang-ho, an analyst at NH Investment and Securities.
He expected the bullish atmosphere to continue at least until the end of the third quarter, on rosy outlook on both businesses and the economy and abundant liquidity.
Analysts say it took shorter time than expected to reach 2,000 points, and attribute it mostly to Koreans' shift to investment funds from bank deposits.
Low interest rates for bank deposits and tougher regulations on the real estate market drove Koreans to fund investments, as they have strong motives to be prepared for retirement in a society aging more rapidly than any other country in the world.
Funds investing in the local stock market are seeing hundreds of billions of won flowing into the equity market, and the massive inflow of money drew up the Seoul bourse even against such bearish factors as higher oil prices and a stronger won.