[High Kick Korean Stock Market] Unexpected V-Shaped Rebound Led by 'Donghak Ants'

How Has the Domestic Stock Market Changed in the Era of COVID-19?

[Asia Economy reporters Song Hwajeong and Ko Hyeonggwang] Amid the turmoil in global stock markets caused by the shock of the novel coronavirus disease (COVID-19), the Korean stock market has shown the strongest resilience. Despite the surge in uncertainty and pessimistic forecasts for the stock market following the COVID-19 pandemic, it quickly recovered, leading a 'V-shaped rebound.' Untact (non-face-to-face) stocks and pharmaceutical and bio-related stocks hit new highs, and individual investors spearheaded the rebound by coining the new term 'Donghak Ant Movement.'

◆Steeper rebound than major countries' stock markets= According to the Korea Exchange on the 19th, the KOSPI index closed at 2133.48 the previous day. This represents a 46.4% rebound from the year's lowest point (1457.64) on March 19, caused by the spread of COVID-19. After recovering the 2000-point level for the first time in about 50 days at the end of last month, it surpassed the 2200-point level intraday on the 8th of this month. It created a strong rebound market by closely approaching the January high (2267.25). The KOSDAQ's rise was even more significant. The KOSDAQ index closed at 737.33 the previous day, far exceeding the pre-COVID-19 highest point of 692.64 (February 17). Compared to the lowest point three months ago (428.35), it surged by 72.1%.

The domestic stock market's rise rate from the yearly low was the highest among major global stock markets. The three major U.S. indices?the Dow Jones Industrial Average, the Standard & Poor's 500 (S&P 500), and the Nasdaq (as of the 18th)?rose 40.3%, 39.2%, and 44.9%, respectively, from their March lows. Germany's DAX 30 index rebounded 45.5%, and France's CAC 40 index rose 32.1%, but both fell short of the KOSPI's rise rate.

Compared to Asian stock markets, the domestic market's rise rate was even more pronounced. The Shanghai Composite Index in China recorded its lowest point at 2660.17 on March 24 and rose to 2939.32 the previous day, a rise rate of only 10.5%. During the same period, Hong Kong's Hang Seng Index, an Asian financial hub, rose just 12.8%. The Taiwan Weighted Index, which showed a movement similar to Korea's, rose 35.5% from its low, and Japan's Nikkei 225 index rose 35.1%, both lower than the KOSPI.

The clear rebound in the domestic stock market is attributed to the earlier easing of the COVID-19 spread compared to other major countries, which quickly calmed investor anxiety. Additionally, individual investors, known as 'ants,' played a significant role as a pillar of the stock market by mobilizing enormous funds to absorb large-scale sell-offs by foreigners. Kim Hakgyun, head of the research center at Shin Young Securities, explained, "The Korean stock market had less price burden due to its long-term underperformance compared to major global countries, and aggressive buying by individual investors formed a strong rebound market after the March low."

There is still ample liquidity waiting to enter the stock market. As of the 16th, the investor deposit amount held in securities firms' accounts was 48.073 trillion won, the highest ever. Due to the base interest rate cut, the credit loan balance also reached 12.0262 trillion won, the highest level in two years since June 2018. Combining investor deposits and credit loan balances, individual investors have more than 60 trillion won ready to be immediately invested in the stock market.

◆Pharmaceutical, bio, and untact sectors lead the stock market= The KRX Healthcare Index rose 47.10% from the beginning of the year as of the close on the 17th. Samsung Biologics, the leading bio stock, saw its stock price rise 92.3% from the start of the year. Celltrion also rose 60.83% year-to-date. Celltrion Healthcare and Celltrion Pharm surged 102.66% and 247.86%, respectively, compared to the beginning of the year.

Lee Myeongseon, a researcher at Shin Young Securities, said, "Despite negative issues such as consecutive global Phase 3 clinical trial failures, accounting fraud, product cancellations, and lawsuits last year, investment sentiment toward pharmaceutical and bio stocks deteriorated significantly, but this year, amid the economic recession caused by COVID-19, they are rather gaining attention."

Untact stocks also saw significant price increases. Internet services and gaming are representative untact sectors. NAVER rose 37.53%, Kakao 72.46%, and NCSoft 60.07% year-to-date. Hwang Seungtaek, a researcher at Hana Financial Investment, explained, "Internet platform and gaming companies are attracting attention because they provide core services centered on non-face-to-face interactions. Except for some services of platform companies, most sales and profits are generated through non-face-to-face interactions, so the impact of social distancing due to COVID-19 was limited."

The investors leading the stock market trend have also changed. In the past, foreigners and institutions were the major players influencing the market. However, after the COVID-19 crash, individuals have taken the lead in the stock market trend. Since March, when the impact of COVID-19 on the stock market became pronounced, foreigners sold about 22 trillion won in the domestic stock market. During the same period, institutions sold 2.4 trillion won. In contrast, individuals bought 23 trillion won, playing a significant role in defending the stock market.

Lee Jaeyoon, a researcher at SK Securities, said, "Due to the long-term low-interest-rate environment, the increase in smart ants, and the difficulty in finding investment destinations, individual investors' interest in stocks will further increase. Unlike in the past, there has been a significant increase in approaches to blue-chip or leading stocks rather than simply targeting excessively fallen stocks, which is positive."

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