"This Is the Moment They've Been Waiting For"...Stock Market, Ants Timing Their Moves

Investor Deposits Reach 28.72 Trillion KRW
"2100 Level Is Not a Crisis but an Opportunity"
Weighing the Timing for Bottom-Fishing Investments

[Asia Economy Reporters Koh Hyung-kwang and Oh Ju-yeon] 'Buy in fear.'

This is the perspective of stock investors facing the recent sharp market decline. Despite increased uncertainty caused by the novel coronavirus infection (Wuhan pneumonia) leading to a more than 7% plunge in the Chinese stock market and a 50% surge in the volatility index (VIX), known as the 'fear index,' compared to its 13-week low, individual investors are instead viewing this as a buying opportunity at the bottom and are weighing the timing of their investments. Historically, those who bought at low prices during downturns have achieved high returns.

The question is, 'Is now the time to buy in fear?' In the securities industry, the prevailing view is that this sharp decline is an opportunity, as trading volume has significantly increased this year amid expectations of fundamental improvements (corporate earnings) and global economic stimulus, leading to a recovery in investor sentiment. Accordingly, funds waiting to buy stocks have swelled to 28 trillion won.

On the 4th, as the spread of the novel coronavirus infection caused instability in the domestic stock market, dealers were busy working in the dealing room of Hana Bank in Euljiro, Seoul. On that day, the KOSPI index opened at 2,121.22, up 2.34 points (0.11%) from the previous trading day. Photo by Moon Honam munonam@

According to the Korea Financial Investment Association on the 4th, investor deposit funds reached 28.72 trillion won at the end of last month, marking the highest month-end amount in the past year. Investor deposit funds refer to money that investors have left with securities firms after selling stocks or funds entrusted to buy stocks, classified as funds waiting to be invested in stocks. An increase in investor deposit funds means that more money is flowing into the stock market. The investor deposit funds, which were 23.23 trillion won in August last year, increased to 24.46 trillion won at the end of September, 25 trillion won at the end of October, 24.67 trillion won at the end of November, and 27.23 trillion won at the end of December.

In particular, when the KOSPI index plunged intraday to 1891.81 (-2.83%) and fell below the 2000 mark in August last year, investor deposit funds shrank to the 23 trillion won level. However, after this recent plunge, daily investor deposit funds reached as high as 30 trillion won. During the four consecutive trading days of decline from the 28th to the 31st of last month, when the KOSPI dropped 3.56% intraday on the 28th, investor deposit funds fluctuated between 28 trillion and 30 trillion won.

Compared to the forecast for the KOSPI's rise this year, the analysis that the 2100 level is not a crisis but an opportunity is dominant. Kim Yong-gu from Hana Financial Investment said, "If the previously rapid increase in confirmed cases slows down or the number of recovered patients surpasses deaths, anxiety is likely to subside significantly," adding, "If the possibility of further decline at the current index level is limited, the current stalemate is a good opportunity for long-term low-price buying."

In fact, funds used to buy stocks are also increasing. According to financial information provider FnGuide, on the 3rd, when the Chinese market reopened after the Lunar New Year holiday and plunged, causing the KOSPI to fall to 2082.74, domestic equity funds saw a net inflow of 31.1 billion won. Although 1.833 trillion won had flowed out over the past month, funds that confirmed the bottom appeared to have returned on that day. Notably, index funds linked to the index recorded a net inflow of 51.3 billion won in a single day.

Trading volume in the stock market has also increased by nearly 30% compared to the previous year, indicating a gradual revival of previously subdued investor sentiment. According to the Korea Exchange, the average daily trading volume of the domestic stock market (KOSPI and KOSDAQ) in January was 11.8813 trillion won.

This represents a 27.7% (2.5821 trillion won) increase from last year's average daily trading volume of 9.2992 trillion won and a 29.6% (2.7179 trillion won) increase compared to December last year (9.1634 trillion won). Over the past 10 years, the average daily trading volume exceeded 10 trillion won only once in 2018 (11.4742 trillion won), when the stock index reached its peak, but January this year surpassed that level.

By market, the average daily trading volume of the KOSPI increased by 28.9% (1.4448 trillion won) from 4.9898 trillion won last year to 6.4346 trillion won last month, and the KOSDAQ trading volume rose by 26.4% (1.1373 trillion won) from 4.3094 trillion won to 5.4467 trillion won.

The securities industry interprets the increase in trading volume as a revival of investor sentiment due to some easing of uncertainty following the Phase One agreement in the US-China trade dispute that had weighed on the market last year. There is also speculation that with ultra-low interest rates continuing and strengthened real estate regulations, market liquidity has flowed into the stock market as another investment avenue.

However, concerns remain that prolonged impact from the novel coronavirus could somewhat dampen investor sentiment. Seo Sang-young, a researcher at Kiwoom Securities, said, "The signing of the Phase One US-China trade agreement provided relief to the market, and combined with ultra-low interest rates and strong real estate regulations, stock market funds have increased for the first time in a while," adding, "It remains to be seen how much impact the novel coronavirus will have on the stock market."

This content was produced with the assistance of AI translation services.