Market puts Covid-19 in rearview mirror, aims for new records

The sign board at the Hana Bank's dealing room in central Seoul shows the Kospi rallying on Thursday. [YONHAP]

A woman in her early 40s opened an online brokerage account via an app in April after seeing share prices collapse in March. She had never before traded stocks.

“I really didn't know where to invest,” the woman said. “But I didn’t want to miss out.”

She's not alone.

In the first half of the year, retail investors net purchased nearly 32 trillion won worth ($27 billion) of Kospi stocks and 39.6 trillion won of Kosdaq stocks, according to Korea Exchange.

The haul is the largest ever for retail investors in a first half.

During the same period, foreign investors net sold 26.6 trillion won of Kospi and Kosdaq stocks while institutional investors net sold 14.3 trillion won worth.

The current buying by retail investors is not stopping. Last month alone, retail investors bought 2.2 trillion won of Kospi stocks and 1.6 trillion won of Kosdaq stocks.

The buying spree has supported the market and help drive a bull run, with the Kospi hitting recent highs for three consecutive days.

On Tuesday, the market hit a six-month high closing at 2,279.97, up 1.29 percent. The previous peak this year was on Jan. 22, when the index hit 2,267.25.

The next day, the market rose 1.4 percent to close above 2,300 for the first time in nearly two years. The last time the market was above 2,300 was on Oct. 2, 2018, when it closed at 2,309.57.

The rally continued Thursday, with stocks rising 1.33 percent to close at 2,342.61.

Thursday, retail investors and foreign investors flipped roles, with the former ending a six-day buying streak and the latter ending a four-day selling streak.

The recent bull run got rolling after a massive crash earlier in the year, the Kospi now up 56.4 percent from the recent low of 1,457.64 hit on March 19. Kosdaq stocks are up 95 percent from the March 19 low, when the market closed at 428.35. On Aug. 4, it closed at 835.35.

The Financial Services Commission believes that the strong market is a result of positive sentiment regarding the economy and the country's efficient handling of the coronavirus crisis.

A raft of positive indicators have been released by the government, including improving industrial output, rising consumption and investment and a slowing in the decline of exports. Hope for a third-quarter rebound is now high.

Excess liquidity also helps explain the dramatic stock-price rise.

As of Thursday, the total market capitalization of Kospi and Kosdaq stocks hit 1,909 trillion won — 1,590 trillion won for Kospi shares and 318 trillion won for Kosdaq shares. That’s 146.4 trillion won more than a month ago.

That’s double the 59.2-trillion-won increase in July.

“In terms of liquidity, the stock market is still on solid ground,” said Lee Ye-shin, Shinhan Investment analyst. “Backed by the excessive liquidity, the purchases of leading industries from fuel cell to bio has led to the rising index.”

“The fact that the Kospi has exceeded 2,300 either means that all factors that have held back the market from moving above the threshold between 2018 and 2020 have been overcome or that there are expectations for more favorable factors,” said Ha In-hwan, analyst at Meritz.

Retail investors may also be flocking to the stock market as the government has been tightening its regulation on real estate purchases.

According to the Korea Financial Investment Association, in the first quarter of this year, 2,935 new stock investment accounts were opened, which is a 5 percent increase compared to the same period last year.

Of those new accounts, half were opened by people in their 20s.

Some experts see the rise continuing.

“The Kospi has secured the engine for additional increases powered by several earnings surprises in the second quarter,” said Meritz analyst Ha.

BY LEE HO-JEONG [lee.hojenog@joongang.co.kr]