"The Power of Donghak Ants" KOSPI's Rise Rate Ranks 2nd Among 20 Countries

[Asia Economy Reporter Minji Lee] Since the global stock markets plummeted due to the impact of the novel coronavirus infection (COVID-19), the KOSPI has recorded the second highest rate of increase among the representative indices of the Group of Twenty (G20) countries. This is interpreted as being influenced by the inflow of funds from individual investors, known as 'Donghak Ants.'

According to the Korea Exchange on the 13th, as of the closing price on the 11th, when comparing the representative stock indices of G20 countries to their yearly lows, the KOSPI index rose by 64.42%, ranking second after Argentina (107.54%).

[Image source=Yonhap News]

This was higher than advanced countries such as Germany (56.40%), Japan (41.40%), and France (34.07%), as well as Brazil (54.73%), India (49.55%), and Russia (46.96%). Major U.S. indices such as the S&P 500 (49.32%), Dow Jones Industrial Average (48.80%), and Nasdaq (58.20%) also lagged behind the KOSPI's rate of increase.

Compared to the end of last year, only four countries saw their indices rise: South Korea (9.06%), Argentina (10%), the U.S. (S&P 500 index, 3.41%), and China (Shanghai Composite Index, 6.89%). While global stock markets have not fully recovered from the March crash caused by COVID-19, the domestic stock market showed a high rate of increase, supported by the inflow of funds from individual investors.

Individual investors have net purchased 25.7591 trillion won from the yearly low on March 19th to the 11th. During the same period, foreigners and institutions net sold 14.9247 trillion won and 11.9152 trillion won, respectively.

Despite the U.S. stock market showing weakness this month, the domestic stock market's strong performance is also attributed to liquidity supply from individual investors. The S&P 500 and Nasdaq indices, after reaching record highs on the 2nd (local time), fell by 6.70% and 9.98%, respectively, but the KOSPI rose by 0.03% since the 3rd.

With government support policies for new industries joining in, positive prospects are being raised for the domestic stock market going forward. According to the Korea Financial Investment Association, as of the 10th, customer deposits reached 57.4 trillion won.

Researcher Yesin Lim of Shinhan Financial Investment explained, “Considering recent real estate policies, stock market tax reforms, and the establishment of New Deal funds, it is judged that the government intends to channel liquidity into the stock market,” adding, “Considering public offering subscriptions, individual investors are voluntarily showing interest in the stock market now, so the likelihood of a sharp decline in trading volume is low.”