[Weekly Market Review] KOSPI Sets 'Record After Record'... Will 2021 Take an Uncharted Path?

Active Individual Participation in 2020 Domestic Stock Market
Average Daily Trading Value of 11.9 Trillion KRW, 35 Million Stock Trading Accounts
Domestic and Foreign Securities Firms Forecast KOSPI Above 3000 Points This Year

[Asia Economy Reporter Oh Ju-yeon] In 2020, the domestic stock market hit its lowest point on March 19, falling to the 1400 level due to the spread of the novel coronavirus infection (COVID-19), but closed at an all-time high of 2873.47 points on December 30. During this period, the domestic stock market set consecutive records not only in the index but also in trading volume and individual investor participation. The securities industry expects the spectacular rise in the stock market amid the COVID-19 adversity to continue into 2021. Although the recent surge in the stock market is burdensome, analyses suggest that fourth-quarter earnings and expectations for the inauguration of the new U.S. administration will support the upward trend.

[Image source=Yonhap News]

According to the Korea Exchange on the 2nd, the average daily trading value of the KOSPI in 2020 reached a record high of 11.9 trillion won, up 115.2% from the previous year. This was due to the more active participation of individual investors in the market than ever before.

In the KOSPI market, the average daily trading value by individuals was 8 trillion won, an increase of about 5.7 trillion won from 2.37 trillion won in 2019. The trading share also surged from 47.5% to 65.8%, creating a unique scene where individuals, rather than foreigners and institutions, led the market. In the KOSDAQ market, the average daily trading value by individuals increased by 5.9 trillion won to 9.5 trillion won compared to the previous year, and the trading share expanded from 84.7% to 88.2%. This was because, amid a low-interest-rate environment, individuals' interest in stock investment increased, and individuals who had learned from past crises such as the IMF foreign exchange crisis and the 2008 financial crisis actively engaged in bottom-fishing stocks.

In particular, even after the COVID-19 crisis, individuals showed steady buying momentum during the stock price rise, showing a different behavior from past crises, which marked a distinction.

For example, after the bottom of the 2008 financial crisis, from October 24, 2008, to September 22, 2009, individuals net sold stocks worth 3 trillion won, and after the market bottomed due to the 2011 fiscal crisis, from September 26, 2011, to March 19, 2012, they sold about 13 trillion won. During these periods, foreigners bought more than 2 trillion won and 10 trillion won respectively, benefiting from the rise after the bottom.

Unlike these past behaviors, during the COVID-19 crisis, from March 19 to December 30, individuals net bought nearly 30 trillion won, fully enjoying a strong market where the index doubled from the 1400 level to the 2800 level. During this period, foreigners net sold more than 12 trillion won.

The number of stock trading accounts also surged, with 6.12 million new accounts (20.7%) opened compared to 29.36 million accounts at the beginning of 2020, exceeding 35.48 million accounts by the end of December.

It was also a year that recorded the highest levels in terms of public offering subscription fever and stock price increase rates. Future growth industries such as SK Biopharm, Big Hit, and Kakao Games led the subscription frenzy, with IPO subscription deposits ranking first to third all-time, and competition rates exceeding 1000 to 1 (Kakao Games, Myungshin Industry, Kyochon F&B, etc.). Additionally, the stock price increase rate compared to the public offering price of newly listed stocks reached the highest level in the past 10 years (68.5%).

The securities industry expects this bullish market to continue this year, with the KOSPI surpassing 3000 points for the first time in history.

Samsung Securities forecasted that this year the KOSPI will mark the start of a major upward trend, breaking historical highs due to rapid normalization of export and earnings fundamentals and a favorable global policy environment. KB Securities expected the KOSPI to reach 3200 points as the economy and earnings rapidly normalize simultaneously, driven by expectations for the U.S. Biden administration and increased net profits of domestic listed companies.

Daishin Securities diagnosed that corporate profits will be revised upward due to global trade and economic recovery, pressure from won appreciation, and strengthened export momentum, entering the 'KOSPI 3000' era this year.

These positive outlooks are shared by foreign securities firms as well. Goldman Sachs upgraded its investment opinion on the Korean stock market to 'overweight' due to entering a global economic recovery phase and positive evaluations of domestic corporate fundamentals. JP Morgan predicted a significant increase in Korean corporate profits in 2021 and overcoming undervaluation through shareholder-friendly policies. They also expected funds to flow into stocks due to government real estate regulations, with the KOSPI reaching 3200 points.

KB Securities researcher Lee Eun-taek said, "The KOSPI net profit in 2021 will increase by 52% from the previous year to 135 trillion won," raising the previous forecast of 120 trillion won. He added, "The semiconductor super cycle will be accelerated, and the dollar weakness will provide upward momentum to earnings estimates in cyclical and domestic sectors due to rising commodity prices and emerging market currency strength," concluding, "The upward trend will continue in 2021."