[KOSPI 3000] Reaching the 3000 Mark 38 Years After Its Launch

[Asia Economy Reporter Koh Hyung-kwang] 3000. The KOSPI opened a new chapter in its 38 years since its launch. This achievement was earned steadily by overcoming waves such as the International Monetary Fund (IMF) bailout crisis, the information technology (IT) bubble burst, and the global financial crisis.

The stock index has been calculated since early 1964, 57 years ago. At that time, it followed the Dow Jones method, calculating the index using only some blue-chip stocks among listed companies. However, due to lack of representativeness, it was revised three times over 19 years, and in 1983, the current KOSPI index, based on market capitalization, was born. On January 4 of that year, the first closing price of the KOSPI, which was launched with the market capitalization from three years prior as the base (100), was 122.52. Although expectations for the new index were high, the KOSPI ended its first year down 4.8%.

The KOSPI's upward rally began in the mid-1980s. The KOSPI, which was only 164 at the end of 1985, rose to 272 by the end of 1986, and then surpassed the 500 mark for the first time on August 19, 1987, just over eight months later. Two years later, on March 31, 1989, it broke through 1000 for the first time in history. In the 1980s, the KOSPI was led by three sectors: construction, finance, and trade. These sectors, called the 'troika,' became the protagonists of the bull market based on the three lows (low dollar, low interest rates, and low oil prices).

Afterward, the KOSPI fluctuated but plunged sharply at the end of 1997 during the country's greatest crisis, the IMF crisis. On December 3, 1997, when the IMF bailout agreement was reached, the index was at 379.31, and by June of the following year, it plummeted to 277.37, the lowest point since 1987.

As the Korean economy recovered from the foreign exchange crisis shock, the KOSPI also gradually revived. In 1999, the stock market surged amid the IT investment boom. The KOSPI quickly regained the 1000 level and seemed ready to soar again. However, in 2000, the global IT bubble burst and the aftermath of the credit card crisis overlapped, causing the KOSPI to fall again. On April 17, 2000, the index plunged more than 10%, triggering the first-ever circuit breaker. Additionally, the September 11 terrorist attacks in the United States occurred in 2001. The day after the attacks, the KOSPI plunged 12% in a single day, dropping to the 400s.

Since the mid-2000s, as the global economy recovered and global liquidity was supplied, the KOSPI regained its upward momentum. It recovered the 1000 level in 2005, and with the influx of mid- to long-term investment funds due to the installment fund craze, it surpassed the 2000 mark for the first time on July 25, 2007.

However, in 2008, it faced another major crisis. The global financial crisis began with the bankruptcy of Lehman Brothers in the United States, causing the KOSPI to plummet. The index, which hovered around the 1900s in May that year, plunged to 892.16 by the end of October. On October 16 of that year, the KOSPI fell 126.5 points (9.3%) in a single day.

Afterward, the KOSPI revived thanks to the performance of the 'Cha-Hwa-Jeong' sectors (automobile, chemical, and refining). As foreign capital flowed into Asia's emerging markets and the domestic and international economies recovered, the KOSPI soared vertically to an all-time high closing price of 2228.96 on May 2, 2011. However, shortly thereafter, due to the downgrade of the U.S. credit rating and the European fiscal crisis, the KOSPI fell below the 2000 level again. It remained in a 'Boxpi' state (KOSPI stuck in a box range) for six years until it broke the previous record by reaching 2241.24 on May 4, 2017.

At the end of January 2018, it touched 2600 intraday for the first time in history, but fell again due to the U.S.-China trade dispute, and the Boxpi trend between 2000 and 2300 continued for another two years. Last year, when the unprecedented novel coronavirus disease (COVID-19) froze the global economy, the KOSPI also collapsed weakly. The index, which was in the low 2000s in early March, plunged to 1457.64 in about 20 days, breaking the 1500 level for the first time in 10 years. Afterwards, the KOSPI quickly rebounded in a 'V' shape on expectations of economic recovery. It recovered the 2000 level in May last year, surpassed 2600 in November, breaking the previous record. Then in December, it crossed 2800, and on the 4th of this month, it surpassed 2900 consecutively, and finally, at the start of trading on that day, it reached the 3000 level for the first time in history. The KOSPI market capitalization, which was only 3.49 trillion won at launch, has increased 590 times to 2059 trillion won as of the previous day.