[Weekly Market Review] Despite COVID Spread, Stock Market Shines... KOSPI Heading Toward 2600

[Asia Economy Reporter Oh Ju-yeon] Despite the spread of the novel coronavirus infection (COVID-19), the domestic stock market continues to show strength. The KOSPI, having settled above the 2500 mark, is now approaching the 2600 level. As the index surpassed 2500, individual investors realized profits by net selling over 5 trillion won this month, while foreign investors boosted the index by scooping up 5.4 trillion won worth of stocks in the KOSPI market alone.

According to the Korea Exchange on the 21st, foreign investors net purchased stocks worth 1.0916 trillion won in the KOSPI market during the third week of November (16th?20th). Except for one day, foreign investors have maintained a buying trend throughout November. This marks 12 consecutive days of net buying since the 5th.

Individual investors, who had net sold about 5 trillion won from early to mid-November, bought stocks worth 197.8 billion won in the second week. Institutions net sold stocks worth 1.2435 trillion won.

The stocks most purchased by foreign investors in the KOSPI market were SK Hynix and Samsung Electronics. Foreign investors poured 469.2 billion won into SK Hynix and 321.1 billion won into Samsung Electronics over the week. They also net bought LG Chem (213 billion won), Amorepacific (162.1 billion won), KODEX200 (129.6 billion won), Hyundai Motor (47.2 billion won), Kakao (42.7 billion won), Hana Financial Group (36.9 billion won), and SK Biopharm (36.3 billion won) in sequence.

Individual investors purchased Samsung Electronics preferred shares (284.3 billion won), Korean Air (164.1 billion won), Kia Motors (129.8 billion won), NAVER (118.8 billion won), Celltrion (54 billion won), Green Cross Holdings (43.2 billion won), and Cosmax (41.4 billion won), among others.

Meanwhile, it is noteworthy that contact-related stocks, including cyclical stocks, have been showing strength following news about COVID-19 vaccines.

Immediately after COVID-19, non-face-to-face (untact) related stocks surged for a while, driving the index up. During the period when the index was consolidating, policy-themed eco-friendly stocks led the market. Subsequently, with the news of COVID-19 vaccine development raising expectations for economic normalization, cyclical stocks have been rising one after another.

Untact-related stocks, represented by NAVER and Kakao, showed strong stock performance 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 the summer stock market, eco-friendly stocks saw significant gains. Ahead of the U.S. presidential election, Democratic candidate Joe Biden's eco-friendly and renewable energy pledges, along with South Korea's 'Korean New Deal' policy, were mentioned, leading to the emergence of beneficiary stocks.

The recent breakthrough of the KOSPI above 2500 is thanks to cyclical stocks that had not risen until now. Petrochemicals, steel, and semiconductors joined the rally belatedly, pushing the index higher.

Ha Jae-seok, a researcher at NH Investment & Securities, explained, "In 2020, untact assets showed strength due to liquidity effects flowing in during the process of overcoming COVID-19, but currently, during the economic recovery phase, the concentration on untact assets is easing." He added, "This trend is expected to continue into the first half of 2021, with cyclical assets becoming the center of recovery."