KOSPI Breaks 2500 Level
51% Rise Over 8 Months Since April
Industries Take Turns Showing Strength
[Asia Economy Reporter Oh Ju-yeon] Since the outbreak of the novel coronavirus infection (COVID-19), different sectors with varying colors have alternately led the stock market. Immediately after COVID-19, untact-related stocks surged for a while, driving the index up, and during the period when the index was taking a breather, policy-themed eco-friendly stocks led the market. Later, as news of COVID-19 vaccine development increased expectations for economic normalization, cyclical stocks began to rise one after another. As the upward trend shifted among sectors, the KOSPI has now settled around the 2500 level.
According to the Korea Exchange on the 18th, from April to November, an eight-month period, the KOSPI rose 50.94% from 1685.46 (closing price on April 1) to 2544.00 (as of 10 a.m. on the 18th). Especially, when dividing this period into April to June, right after COVID-19, July to August when the index was flat, and September to November when expectations for economic recovery grew, it was found that rather than one sector continuously leading the market, various sectors alternately drove the index.
The untact stocks were the main players who restored the index, which had plummeted to the 1400 level after the COVID-19 impact, back to the 2180 level by mid-June, thus reestablishing the 2000 level. Untact-related stocks, represented by Naver and Kakao, showed strong stock prices especially when social distancing measures were strengthened. Naver’s stock price rose 63.80% from early April to the end of June, and Kakao surged 78.00%.
In particular, these stocks continued to rise until July and August as there were forecasts that they would be in a structural growth phase even after next year, not only due to the untact issue. However, with recent stock price adjustments following news of COVID-19 vaccine development, Naver’s stock price growth rate from September to November was -13.25%, and Kakao’s was -9.09%, stepping back somewhat.
During the summer stock market, eco-friendly related stocks showed significant gains. Ahead of the U.S. presidential election, eco-friendly and renewable energy pledges proposed by then Democratic candidate Joe Biden and domestic policies such as the 'Korean New Deal' were mentioned, leading to beneficiary stocks emerging. Hanwha Solutions and CS Wind showed the highest stock price growth rates of 111.95% and 138.93%, respectively, during the July to August period among the divided periods of April to June, July to August, and September to November. However, as the U.S. presidential election was held in November, the disappearance of positive factors caused their stock prices to remain flat.
Recently, as the KOSPI broke through the 2500 level and is aiming for an all-time high, it is thanks to cyclical stocks that had not risen until now. Petrochemicals, steel, and semiconductors joined the rising ranks belatedly, pushing the index up. Due to expectations for the semiconductor market next year, Samsung Electronics and SK Hynix stocks have jumped with double-digit growth rates over the past two months. The steel and chemical sectors showed similar trends. While untact and eco-friendly stocks faltered from September to November, Kumho Petrochemical rose 41.34%, and POSCO rose 27.88%.
Kim Su-yeon, a researcher at Hanwha Investment & Securities, diagnosed, "Since last September, rotation between growth and value stocks has begun, and the high preventive efficacy of COVID-19 vaccines being developed by Pfizer and Moderna is accelerating this rotation." Researcher Kim added, "Especially in the past four months, the outperformance strength of value stocks (expectation that specific stock returns will exceed the market average) has increased," and mentioned, "There is still room for value stocks to further outperform."
Oh Tae-dong, a researcher at NH Investment & Securities, said, "Corporate profits of domestic value stocks turned to growth in the third quarter of this year," and "The base effect will peak in the first half of next year." Researcher Oh added, "As we move into the second half of the year, the profit momentum of growth stocks will again become more prominent than that of value stocks."
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