Why analysts didn’t predict the boomOn May 11, the Kospi soared to 2296.37, for the first time in the 37 years since it opened at 100 on January 4, 1980. The range that it had stayed in for six years since it reached 2228.96 on May 2, 2011 was finally broken. However, the security market is feeling rather embarrassed instead of celebrating. The financial industry did not predict the surge.
In November 2016, securities firms published reports on the 2017 stock market outlook. Most predicted that the Kospi would be between 1800 and 2300 this year. They cautiously predicted that the stock market would not fluctuate much in the first half of the year and then go up to between 2200 and 2300 by the end of the year.
But the forecasts missed the mark. This year the Kospi briskly went up and broke out of the box that lasted for six years. As the Kospi set a new record, financial firms adjusted the upper limit of the band to 2,500, but they are still too late to keep up with the market.
Predicting the stock market is said to be a divine art. But it is a serious problem that none of the 54 securities companies in Korea predicted a thriving Kospi. According to the Korea Financial Investment Association, there are 35,699 employees and executives at securities firms as of September, 2016. It is 7,392 less than the 43,091 in September, 2012.
The financial industry struggled just as much as the stagnant Kospi for the last five years. As more people make stock transactions online, companies competed to lower fees. Some securities firms closed due to low profitability, and mergers and acquisitions followed. In the process, many employees were laid off.
In the financial industry, qualitative withering is considered a more serious problem than quantitative reduction. A series of restructuring, mergers and acquisitions made a talented workforce move to other industries. Unless the Korean financial industry makes efforts to keep competent workers from leaving and invests to train a professional workforce, the celebrations will continue to be dominated by foreign investors.
*Business news reporter of the JoongAng Ilbo.