By Kang Seung-woo
Starting in the new year, an increasingly large number of stock traders may rush to the Seoul bourse on the grounds that the Year of the Rabbit in the 12-year cycle of the Chinese zodiac has repeatedly heralded a bullish run on the stock market.
Since the Korea Composite Stock Price Index (KOSPI) started from a base value of 100 in January 1980, the Korea Exchange (KRX) has seen two rabbit years in 1987 and 1999 and both saw impressive performances.
The KOSPI began 1987 at 264.82 points and jumped sharply to 525.11 ― a 98.3 percent gain ― by the end of the year; while 1999 saw the benchmark index post a 75 percent increase after it more than doubled from 587.57 to 1028.07.
A market expert said that the preparation for the Seoul Olympics in 1988 had a positive influence on the stock market, along with the flourishing local economy.
“At that time, the Korean economy enjoyed low interest rates, a weak dollar and low oil prices. As a result, companies could raise funds easily, which translated into aggressive investments, while they were able to increase production, helped by low oil prices,” a Seoul-based analyst said.
“In addition, the construction and banking industries, which were sandwiched between the conventional and services sectors played a leading role.”
In 1999, Korea was in the third year of the International Monetary Fund (IMF) bailout package.
Another analyst said that the nation’s exports from the information technology (IT), shipbuilding and auto industries improved thanks to an edge in price competitiveness over those of Japan.
“Korean shares were rebounding after undergoing restructuring. In particular, blue-chip large-cap stocks saw rising share prices,” he added.
Korean stocks ended 2010 on a three-year high Thursday after reaching 2,051, up 21.9 percent from 1,696.14 on Jan. 4.
And they are expected to continue a bullish run in the New Year, according to global investment companies.
Goldman Sachs estimates the KOSPI will climb to 2,450, while UBS Securities and Nomura have a target of 2,500 and 2,230 for next year, respectively.