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KOSPI hits record-high in six years

Posted May. 05, 2017 07:15,   

Updated May. 05, 2017 07:20


South Korea's benchmark KOSPI hit an all-time high to climb above its peak in six years. The main contributor is foreign investors’ consecutive purchase of Korean stocks out of expectations on better performance of companies and economic recovery in the future.

On Thursday, KOSPI closed at 2,241.24, up 0.97 percent compared to the previous trading day. It broke its closing record (2,228.96) on May 2, 2011 to break through the 2,240 mark for the first time in its history.

During the day, foreigners’ net purchase of stocks was worth 325.3 billion Korean won (approx. 286 million U.S. dollars), pushing the stock market upwards. Foreigners have bought stocks worth 2 trillion won (approx. 1.76 billion dollars) during eight trading days since April 20 with the only exception on April 28.

KOSPI’s movements were in line with Samsung Electronics, market heavy weight with the greatest market capitalization in Korea. The price of Samsung Electronics’ shares has been on the rise for eight trading days since April 21 to hit another record-high. It closed at 2.276 million won (approx. 2,004 dollars) per share, up 1.38 percent than the previous trading day. Apparently, Samsung’s decision on April 27 to retire its stocks worth 45 trillion won (approx. 39.6 billion dollars) or more instead of conversion to a holding company has given momentum to the upward trend.

Experts interpret the recent KOSPI rally as a signal of full-fledged economic recovery, following the upswing in exports. “The major global economies as well as Korea are getting better, and performance of Korean companies is improving remarkably. This upward trend is expected to continue till next year,” said Oh Hyeon-seok, head of Research Center at Samsung Securities. Some foresee that this time will be different from 2011 when the inflow of global liquidity brought a bear market rally, given that the main stream of global economic recovery is leading the stock markets across the world.

Some critics point out individual investors are being alienated further as the stock price is rising due in large part to foreigners and institutional investors. Individual investors are selling their funds as stock prices are going up. According to FnGuide, a financial data provider, the amount set for stock-type fund has been cut while KOSPI has been lifted by 10.62 percent as of Thursday.

Min-Ki Shin minki@donga.com