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Financial Stocks Led Rebound After Crisis

Feb 20,2001
Financial shares fueled the market's advance following the correction in stock prices after Korea was hit by the financial crisis in late 1997, according to data released by the main exchange Monday.

The Korea Stock Exchange said in a report that such a tendency was evident in three correction phases that occurred after the crisis. The first came during the four months to September 1998, the second from Oct. 12 last year to Dec. 26, and the third from Jan. 26 this year until Friday, it noted.

During these periods, some individual stocks, mostly medium-capitalized shares, rose by an average 4.14 percent, whereas large stocks gained 2.19 percent, and small caps 1.05 percent, the exchange found. No particular sector's movement stood out.

In comparison, financial issues led market gains for one month after the corrections ended, with brokerage house stocks jumping by an average 59.2 percent and bank shares up 47.02 percent. Insurance shares rose 31.83 percent; electronics and telecommunications also staged gains of more than 30 percent in the same span.

During this period, large caps, led by financials, posted an average rise of 30.6 percent, overwhelming medium and small caps, which rose 12.41 percent and 19.41 percent, respectively.

Investors' trading patterns differed during the correction periods, according to the analysis. In particular, local institutional investors did not play their role as the market's "safety pin" when the market was in decline. They were the biggest sellers of shares during the first and second corrections, shedding 1.33 trillion won ($1.07 billion) of stocks.

Individual retail investors supported the market during the first correction period, purchasing 704 billion won of shares. But they sold 1.6 trillion won of shares during the following two corrections.

Overseas investors were the biggest beneficiaries of market rebounds, buying a total of 1.67 trillion won of shares when the market was down, seeking long-term profits.

by Kim Hyun-chul




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