[Weekly Market Review] Unstoppable Rally... KOSPI Surpasses 2730, Individuals Favor 'Inverse'

[Asia Economy Reporter Oh Ju-yeon] The domestic stock market's upward momentum continues unabated. The KOSPI, which started last month at the 2270 level, rose nearly 500 points to reach the 2740 level during intraday trading in December. The KOSDAQ index also surpassed the 900 mark, breaking its highest level of the year.

Amid the stock market setting new records daily, individual investors have continued accumulating inverse ETFs that profit when the index falls, following their activity in November into December. In contrast, foreign investors have shown a 'buying' trend, having net purchased 7.4 trillion KRW from November 2 to 27, and already net purchased 1.5 trillion KRW this month. Although they sold 2.4 trillion KRW on November 30 due to the Morgan Stanley Capital International (MSCI) regular rebalancing issue, foreign investors' net buying appears to be ongoing.

[Image source=Yonhap News]

According to the Korea Exchange on the 5th, the KOSPI rose 3.69% from a closing price of 2634.25 on the 1st of this month to 2731.45 on the 4th. It has already surpassed the 2700 level, which some securities firms had projected as the upper limit for December.

During this period, foreign investors purchased stocks worth 1.565 trillion KRW. This contrasts with individuals and institutions, who net sold stocks worth 756 billion KRW and 778 billion KRW, respectively.

The stock most purchased by foreign investors was Samsung Electronics, with purchases totaling 356 billion KRW. Thanks to this, Samsung Electronics' stock price exceeded 70,000 KRW, breaking its all-time high for the third consecutive day. The prevailing outlook is that this upward trend will continue next year. Samsung Electronics, which had been trading sideways in the 30,000 to 40,000 KRW range and was even nicknamed '30,000 Electronics' or '40,000 Electronics,' has now earned the new nickname '70,000 Electronics' this month amid expectations of a boom in DRAM memory semiconductors.

Additionally, foreign investors ranked LG Chem and SK Hynix as their second and third largest net purchases, respectively. SK Hynix also reached an all-time high, rising to 119,500 KRW during intraday trading on the 4th.

According to financial information provider FnGuide, SK Hynix's market consensus for this year's performance forecasts sales of 31.4326 trillion KRW and operating profit of 4.9122 trillion KRW, representing increases of 16.46% and 81.08% compared to the same period last year. Operating profit for next year is expected to nearly double to 8.0463 trillion KRW, with sales approaching 36 trillion KRW.

Celltrion, ranked fourth in foreign investors' net purchases, also saw its stock price surge to 380,000 KRW. Foreign investors continued net buying in NAVER and Kakao, whose stock prices rose to close higher on the 4th after a period of stagnation.

On the other hand, individuals poured 700 billion KRW into the KODEX 200 Futures Inverse 2X ETF in November and continued to buy 151.6 billion KRW worth this month, making it their second largest net purchase after Samsung Electronics preferred shares. Although the KOSPI has been breaking record highs daily, individual investors seem to be continuously accumulating inverse ETFs, interpreting the recent index levels as a 'peak' that could fall at any time. However, the stock price dropped 31.70%, from a closing price of 4,290 KRW on November 2 to 2,930 KRW on the 4th.

Lee Kyung-min, a researcher at Daishin Securities, said, "The KOSPI is expected to enter the 3000 range next year," adding, "This target reflects the average forecast of record-high profits and includes a valuation premium of 22.34%." He predicted that if profit forecasts are revised upward or valuation reappraisals continue, the potential for further gains will expand.

However, he also noted that a retracement phase could occur in December. The researcher said, "Overheating from the rapid rise in November, valuation burdens, and accumulated fatigue from the rally, combined with the release of shares by major shareholders who meet the criteria, weak economic indicators in December and slower growth compared to the previous month, and unexpected sharp won appreciation causing Q4 earnings concerns, could all stimulate volatility in the KOSPI."