Stock Market’s Record Surge Continues

Stock prices have jumped to a record high in three months.

Yesterday’s KOSPI Index was 1,432.72 at market closing, a 27-point, or 1.92 percent, increase from the previous day. The figure replaced the former record of 1,421.79 on January 16.

The KOSDAQ Index also closed at 704.57, a 7.18-point (1.03 percent) jump from the previous day, reaching the 700 mark for the first time since January 19 (705.57).

With stock prices hitting record highs, the aggregate value of listed stocks went up to the 773 trillion won range for the first time in history.

It is true that the stock market has been strong this year, but the pattern of the recent trend is different from that of the past. The upward movement took place despite the “triple whammy” of an oil price hike, the low exchange rate in the 950-won range and the weak performance of corporations in the first quarter of this year. However, some say that the upward trend might have begun too early.

A Strong Upward Trend?-

With foreigners and institutional investors actively buying shares, stock markets began to be heat up early. Foreigners bought net 67.5 billion won that day. The accumulated net buying since March 21 is 2.26 trillion won. Institutional investors, who were quietly watching the situation, bought net 239.5 billion won that day.

Although Samsung publicized its worst record in 15 months that day, the price of Samsung Electronics shares rose 17,000 won (2.66 percent up) back to 655,000 won, driving the upward trend. This was primarily because investors expected that the semiconductor industry would recover in the second quarter and because the electronics company announced that it bought 1.6 trillion won worth of its own shares, signaling that it would manage its share price.

Park Hyo-jin, a senior researcher at Good Morning Shinhan Securities, said, “With concern over a continuing interest rate hike in the U.S. disappearing, international liquid money has begun to flow into Korea again.”

Lee Jong-woo, research chief at Hanhwa Securities, said, “Factors such as instable corporate performance, an oil price hike and a low exchange rate are already reflected in the stock prices to a large extent,” adding, “It appears that an upward trend of the stock market has begun.”

Others, however, are more cautious.

Hong Seong-guk, research chief of Daewoo Securities, said, “It hasn’t been confirmed yet whether the corporate record of the first quarter is the bottom. And, it is likely that there will be one more chance to buy stocks for a low price, even if one does not rush to buy stocks.”

Kim Young-ik, research chief of Daishin Securities, also predicted that there would be another adjustment in the second quarter.

Pay Attention to the Stocks of Securities Companies-

Predictions of stock prices at the year’s end are largely positive. Daewoo Securities is planning to revise in an upward fashion its stock price forecast for this year’s end (1,550), which it presented last year.

Hong said, “The reevaluation and upward trend of Korean stock markets which started in 2003 is continuing,” adding, “It is desirable to invest with a long-term perspective.”

Hanwha Securities estimates the year-end stock price to be within the 1,650 range, while Daishin Securities is predicting the 1,450 range.

Vice President of Fides Investment Management Kim Han-jin said, “When stock market prices rise not because of individual stocks or special occasions but because of the trust in the market, you need to pay attention to the stocks of securities companies. As such stocks rise when the stock market is strong and fall when the market is weak, you can use them as an indicator in deciding the timing of investment.”

Im-Sook Ha Wan-Bae Lee artemes@donga.com roryrery@donga.com