Will the Era of 50 Million Active Accounts Open Next Month?
Can the Fatigue from 8 Months of Growth Be Overcome?
[Asia Economy Reporters Junho Hwang and Yeonjin Ji] The number of active stock trading accounts has surpassed 49 million. With a series of mega initial public offerings (IPOs) underway, it is expected that the number could exceed 50 million as early as next month. The KOSPI has risen for eight consecutive months through last month, on the verge of setting a remarkable record for the longest monthly winning streak in 44 years since 1977. However, opinions are divided on whether a new record can be set due to fatigue from the prolonged rise.
According to the Korea Financial Investment Association on the 26th, the number of active stock trading accounts reached 49,004,880 as of the 21st. This came 31 trading days (43 calendar days) after surpassing 48 million in early May. Active accounts refer to securities accounts with a deposit asset of at least 100,000 KRW and at least one trade conducted within six months. This typically reflects the level of interest from retail investors in the stock market.
◆Will the 50 million accounts era open next month? = It is expected that the number of active accounts could surpass 50 million as early as next month. After breaking through 3,300, the KOSPI, which had stalled, has now risen to 3,254. The KOSDAQ is also firmly holding the 1,000-point level. An increase in active accounts is also anticipated due to retail investors opening new accounts aiming for the so-called ‘ttasang’ (a term referring to stocks that open at the IPO price and then double on the first day). Starting with KakaoBank, which has a market capitalization of 18.5 trillion KRW based on the public offering price, Krafton’s IPO worth 4 trillion KRW is scheduled for early next month. Notably, Krafton allows multiple subscriptions.
Attention is focused on whether the KOSPI, which has maintained an upward trend for the past eight months, can break the longest monthly record in 44 years. Although the spread of the COVID-19 Delta variant is hampering the index, the recent unprecedented liquidity supply by the U.S. Federal Reserve (Fed) remains a key variable.
The KOSPI’s record of eight consecutive months of monthly closing price increases has only occurred twice: once during the Middle East construction boom in 1997 and the current streak starting last year. In 1977, the KOSPI rose for eight consecutive months from May to December. This time, the rally has lasted eight months from November last year to June, and if the closing price at the end of this month also rises, it will set a historic record for nine consecutive months of gains. As of the closing price on the 23rd, the KOSPI stood at 3,254.42, 38.79 points (1.18%) lower than the previous month’s closing price of 3,293.21.
◆Can the fatigue from eight months of gains be overcome? = For the KOSPI to continue rising, greater momentum is needed, but the domestic and international stock market conditions are not favorable. First, the U.S. stock market has shown a sluggish trend for several months after concerns about a market peak emerged, and global worries about an economic recession are rising due to the spread of the Delta variant. NH Investment & Securities researcher Byung-Yeon Kim pointed out, "Although concerns about an economic recession raised recently in the bond market are considered excessive, they act as a factor slowing the momentum of stock market gains for risk asset investors." Additionally, with the start of the vacation season, additional policy momentum such as the U.S. infrastructure bill is in a lull, limiting factors that could drive stock prices higher.
On the other hand, the Fed’s weekly total assets have recently been on a sharp upward trend. As the Fed prepares for tapering but has not yet confirmed a clear recovery in the employment market amid the spread of the Delta variant, it is supplying massive liquidity. This is considered a factor defending against stock market declines. Researcher Kim said, "The Fed and the U.S. government aim for broad job recovery and maintaining maximum employment levels, so the Fed will maintain a accommodative stance until doubts about the employment market are resolved," adding, "The KOSPI is expected to show a steady and gradual upward trend with a stock market characterized by rotation and diffusion of various issues and themes."
Within the industry, while it is uncertain whether the KOSPI will achieve the longest winning streak record, the possibility of a trend upward is rated highly. Meritz Securities researcher Jinwoo Lee said, "KOSPI companies earned a net profit of 85 trillion KRW last year, and excluding one-off profits from Naver this year, net profits are expected to reach 145 trillion KRW," adding, "Since stock prices reflect the future, next year’s net profit is projected at 175 trillion KRW. Although there may be some pauses or corrections along the way, the direction is unlikely to change as earnings continue to improve."
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