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(News Focus) Stock markets hit record high amid solid earnings, global recovery

2017/12/18 12:15

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By Hwang Doo-hyong

SEOUL, Dec. 18 (Yonhap) -- South Korea's stock markets reached record highs this year backed by solid earnings and the global economic recovery despite North Korea's missile and nuclear threats and the growing protectionism trends abroad.

The benchmark Korea Composite Stock Price Index (KOSPI) opened a new era with the main bourse hitting the 2,500 mark while the tech-heavy KOSDAQ surpassed the 800 mark.

The achievements come amid signs of protectionism after the inauguration of Donald Trump as president in the United States and concerns over major global economies tightening monetary policy. The high numbers were also reached despite the political turmoil surrounding the impeachment of then-President Park Geun-hye in May over alleged corruption, power abuse and several other charges.

Global economic recovery and ensuing strong earnings are seen as pushing up the South Korean stock markets.

Stock prices of Samsung Electronics Co., SK hynix Inc. and several other information technology-related firms have hit all-time highs after uncertainties eased with the impeachment of President Park.

"Stock markets of major economies like in South Korea have been bullish this year amid the strength of risky assets backed by the global economic recovery," said Coi Seok-won of SK Securities Co.

Lee Chang-mok of NH Investment & Securities Co. said the South Korean stock markets have been propped up by the global economic recovery and robust corporate earnings.

"However, it is regrettable that individual investors were unable to enjoy the bullish market as the number of individual investors did not rise substantially," he said.

The Financial Services Commission (FSC) has introduced measures to restrict short-selling and tighten a regulatory filing system early this year to promote the country's stock markets.

KOSDAQ-registered companies have complained about so-called short-selling attacks.

Short selling is an investment technique in which an investor borrows shares and immediately sells them, anticipating that the price will drop so he or she can buy them back at a lower price.

The benchmark KOSPI ended at 2,482.07 Friday, up 22.48 percent from 2,026.47 as of the end of last year.

KOSPI hit a record high at 2,241.24 on May 4 amid political uncertainties caused by the process to ouster Park from power.

The previous record was set at 2,228.96 on May 2, 2011.

The KOSPI soared to 2,450 points in July before falling to 2,330 in early September amid North Korea's detonation of a nuclear bomb and China's economic retaliation over South Korea's deployment of a U.S. anti-missile system.

The KOSPI then began climbing again in October to reach 2,501.93 on Oct. 30.

It hit 2,561.63 in mid-day trading on Nov. 2 buttressed by 525 KOSPI-registered firms posting 120 trillion won (US$110 billion) in operating profits for the first nine months this year, up 27.7 percent from a year earlier.

The secondary KOSDAQ market began jumping in October.

KOSDAQ recovered the 800 point mark by hitting 803.4 on Nov. 24 for the first time since Nov. 7, 2007, coming up from 650 as of the end of September and 700 on Nov. 3.

The tech-heavy market was affected by the Moon Jae-in administration that took power in May having expressed intentions to help boost the KOSDAQ market as a means of supporting venture firms and small and medium enterprises.

The government in March imposed a one-day ban on short-selling of the stocks of companies which have been the target of short-selling attacks.

The government also introduced a new regulatory filing system to improve corporate transparency.

Only 70 out of 748 KOSPI-registered firms, however, joined the voluntary filing system, effectively nullifying the new system in which companies are supposed to report to the FSC 10 items to enhance transparent corporate governance.

The FSC has said it will impose the new filing system on a mandatory basis amid many analysts suggesting the introduction of a compulsory regulatory filing system on a gradual basis.

Market watchers also advised the government to help the KOSDAQ market establish an identity on its own as top-cap Celltrion Inc. has applied to move to the KOSPI early next year.

Kakao, the operator of Korea's dominant messaging app KakaoTalk, also moved to KOSPI from KOSDAQ in July.

As many as 46 companies registered with KOSDAQ shifted to KOSPI since 1999.

Another concern on the KOSDAQ market is a possible bubble burst of biotech and pharmaceutical firms just like the case of the information and technology boom in 2000.

During the 2000 collapse of the information technology sector, the KOSDAQ index nose-dived 82 percent over a nine-month period.

A file photo of a dealing room of the KEB Hana Bank headquarters in Seoul on Nov. 3, 2017. (Yonhap) A file photo of a dealing room of the KEB Hana Bank headquarters in Seoul on Nov. 3, 2017. (Yonhap)

hdh@yna.co.kr

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