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As stock market logs new records in November, investors eye year-end rally

A night view of Yeouido, western Seoul (Herald DB)
A night view of Yeouido, western Seoul (Herald DB)
While South Korea’s main bourse has been hitting all-time highs, the country’s stock market also set records in November on the back of an extended buying spree y foreign investors’ Following this month’s rally, both market watchers and investors are keeping a close watch on whether the market will sustain its momentum throughout the year.

According to the nation’s sole bourse operator, the Korea Exchange, Sunday, the benchmark Kospi on Friday closed at 2,633.45, up 7.54 points or 0.29 percent from the previous session’s close. As the index soared by 16.1 percent this month, the benchmark logged another fresh record high.

Kospi had hit its all-time high of 2,617.76 on Tuesday, breaking the previous record of 2,598.19 set on Jan. 29, 2018. But it exceeded that renewed record on two consecutive days Thursday and Friday. As a result, the main bourse’s market capitalization spiked to a record 1,808 trillion won ($1.63 trillion).

The records came as 30 Kospi-listed stocks surged to their highest prices this month. Market kingpin Samsung Electronics’ stocks closed at 68,200 won on Friday, while shares of LG Chem reached 816,000 won, at Thursday’s closing bell. Samsung SDI and LG Household & Health Care also marked new highs of 552,000 won and 1,607,000 won on Tuesday and Nov. 12, respectively.

Market watchers largely attributed the recent market rally to offshore investors’ massive purchases, followed by the strong Korean won. While the local currency surged to an over 29-month high against the US greenback, closing at 1,103.2 won per dollar on Friday, foreigners raked in some 7.43 trillion won worth of local shares this month. It was the largest figure seen since September 2013, when foreigners bought nearly 7.64 trillion won worth of local shares.

After watching foreigners’ buying movement cautiously, retail investors began scooping up shares from the Kospi market Wednesday. Investors’ influence-buying resulted in the biggest trading volume of 1.4 billion shares worth some 21.8 trillion won on the day. With the trading amount of 18.1 trillion recorded from the tech-heavy Kosdaq market, the total trading value reached about 39.9 trillion won, the highest point since Sept. 8 this year, when it was 36.94 trillion won.

The series of records and hopes of COVID-19 vaccine development, eased political uncertainties over the US presidential election, an improved growth forecast and a strong Korean won elevated investors’ expectations for a continued market rally next month, market experts said.

“The local stock market may face a regulation period in the first week of December. However, it is likely to head to a rally as we get toward the end of this year on the back of the high possibility of US President Trump’s noise being silent and further stimulus measures from the US and Europe in December,” said Chung Myoung-ji, an analyst at Samsung Securities.

Citing the previous market data, some experts warned on the contrary that there are variables on the index’s further rise. Kospi tends to show a stronger performance at the beginning of the year than at the end. The main bourse kicked off bullish six times in January and ended lower six times at year-end during 2010-2019, they added.

On top of that, foreign investors are likely to turn to profit-taking next month after the market surge this month. Retail investors are also expected to offload their shares due to stricter stock transfer tax rules. While local retail investors turned to net sellers for the 12th consecutive year since 2008, they dumped 3.8 trillion won worth of shares in December last year.

“Investors need to watch the upcoming announcements of economic indexes both from inside and outside Korea, as well as listed firms’ final quarterly performance results for the year,” said Lee Kyung-min, an analyst at Daishin Securities. “Although the government’s major shareholder standards are unchanged from 1 billion won, retail investors may cause a market variable since they already went on a speculative binge this year.”

By Jie Ye-eun (yeeun@heraldcorp.com)
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