QE Effects
The Korea Composite Stock Price Index (KOSPI) dipped below the 2,000 point mark for the first time in about a month, as foreign investors sold a lot of shares. Still, market experts are forecasting that the downward trend is unlikely to last long, in spite of the ongoing appreciation of the won at around 1,060 won per US dollar, the less-than-expected earnings for Q3, and vague concerns over the tapering of quantitative easing.
Securities market insiders are expecting that market volatility will disappear with time, thanks to the favorable external and internal conditions with national pension funds and institutional investors preparing to purchase more stock over time.
On November 8, the KOSPI closed at 1,984.87 points, 0.96% down from the previous session. The index fell below 2,000 in 23 sessions for the first time since October 7. Foreign investors’ net sales amount reached approximately 198 billion won on that day, when the selling spree continued for five consecutive sessions. The amount was almost four times that of the previous day. Institutional investors net-sold 14 billion won worth of shares, too.
The bearish mood had to do with Korean companies’ sluggish performance for the third quarter of this year, and the uncertainties concerning when the withdrawal from the quantitative easing program will kick off.
“Nevertheless, the world economy remains on a recovery track, and global liquidity is sufficient with the quantitative easing policy scheduled to be alive at least until this year’s end,” said Hyundai Securities research analyst Lim Jong-pil, adding, “Given the remaining year-end dividend demand, foreign investors are unlikely to drastically speed up their selling spree.”
In the meantime, the won gained 3.5 won vis-à-vis the US dollar on November 8 to close at 1,064.9 won. US economic indices showed a positive sign, leading to some appreciation of the dollar.