After a trade war between the United States and China has created higher uncertainty about emerging markets, the Korean stock market, which has a heavy dependence on exports, has been suffering direct hits. With foreign investors going on a selling spree, the top-tier benchmark KOSPI has lost more than 244 trillion won (US$215.07 billion) in market cap so far this year. It also ranked 16th in terms of earnings rate among G20.
According to Korea Exchange (KRX) on Dec. 16, the market cap of the KOSPI market came to 1,362 trillion won (US$1.2 trillion) as of Dec. 14, down 244 trillion won (US$215.07 billion), or 16.13 percent, from 1,606 trillion won (US$1.42 trillion) at the end of last year.
The KOSPI peaked at 2,598.19 on Jan. 29 based on the closing price but it had shown a steep decline to 1,996.05 on Oct. 29. Since then, the index had tried to rebound but it dropped to 2,069.38 again on Dec. 13 due to a controversy over the semiconductor boom and a concern over the global economic slowdown, including China and Europe.
Compared with the stock markets in major countries, the KOSPI clearly shows a bearish trend. According to the data about the price-earnings ratio of stock indexes in the G20 since the beginning of the year compiled by the KRX, the KOSPI came in 16th as of Dec. 13. Considering the fact that the rate of returns in the KOSPI market ranked sixth among the G20 last year, it shows the striking doldrums this year.
In particular, the KOSPI had experienced the worst crash for a month during “Black October” for the first time in a decade after the global financial crisis. Its index plunged as much as 13.37 percent in a month in October and its market cap decreased nearly 206 trillion won (US$181.58 billion). The secondary KOSDAQ index also decreased a whopping 21.11 percent over the same period, recording the seventh highest drop since 1987 when stock records have been computerized. It lost 56 trillion won (US$49.36 billion) in market cap as well.
This was because the South Korean stock market was affected by external factors, such as the trade conflict between the U.S. and China and the Fed’s tightening monetary policy, this year more than any other countries. South Korea suffered from a bigger impact as its economic structure heavily depends on the U.S. and China, the two parties to the trade war.
Foreign investors sold 5.87 trillion won (US$5.18 billion) worth of stocks on the KOSPI market during the period, while institutional investors net sold 4.14 trillion won (US$3.65 billion) as well. Individual investors who belatedly jumped into the stock market propelled by the brisk market last year net purchased 8.45 trillion won (US$7.45 billion) but not enough to stop the fall in the index.
Particularly, the market cap of Samsung Electronics Co. stood at 232.5 trillion won (US$204.94 billion), down 96.4 trillion won (US$84.97 billion) from 328.9 trillion won (US$289.91 billion) at the end of last year. The percentage of Samsung Electronics in market cap on the KOSPI also dropped from 20.48 percent to 17.07 percent over the same period.
In addition, large-cap stocks had a relatively high fall in market cap. SK Hynix Inc. which ranks second in market cap saw its market cap decrease 19.22 percent, while the market cap of Hyundai Motor Co. fell by 25.32 percent, POSCO Group by 23.61 percent and Naver Corp. by 29.12 percent. However, Samsung Biologics Co. saw its market cap increase 5.53 percent despite a controversy over the accounting fraud allegations, and SK Telecom Co. also showed a 4.87 percent gain.
The KOSDAQ index also peaked at 927.05 on Jan. 29 but hit the bottom at 629.70 on Oct. 29. The KOSDAQ index fell 16.54 percent to 666.34 as of Dec. 14 compared to the beginning of this year and the market cap of the KOSDAQ decreased 59 trillion won (US$52 billion) to 224 trillion won (US$197.44 billion). Notably, KOSDAQ market bellwether Celltrion Healthcare Co. recorded a 35.54 percent drop after it has come under suspicion of fraudulent accounting after Samsung Biologics.
Meanwhile, stock trading has increased this year as market volatility has grown. The daily average amount of share transactions in the KOSPI market stood at 6.61 trillion won (US$5.83 billion) this year, up 24.1 percent from 5.33 trillion won (US$4.69 billion) at the same period last year, while the daily average volume of transactions grew 17.1 percent to 398.82 million shares from 340.46 million shares a year earlier.