[Good Morning Stock Market] "KOSPI Up 16% in November... Foreigners' Net Buying to Continue"

Vaccine Distribution and Economic Recovery Optimism
Gold Down 4.8% and Dollar Down 2.4% This Month
"Strong Risk Asset Preference for Copper and Others"

KOSPI Tops Major Countries in Annual Growth This Year
Foreigners Net Buy 7.4 Trillion Won in November

[Asia Economy Reporter Minji Lee] Since the beginning of this month, the KOSPI has surged about 16%, making South Korea the country with the highest returns among major nations. Foreign investors have continued net buying day after day, outperforming the stock market returns of neighboring countries such as Japan, China, and the United States. The securities industry expects that vaccine optimism is expanding, and with the U.S. and Europe unlikely to reduce the scale of stimulus measures, the net buying trend by foreigners is expected to continue until the end of the year.

[Image source=Yonhap News]

◆ Sangheon Park, Researcher at Hi Investment & Securities = Gold and the U.S. dollar have been declining simultaneously. Gold prices fell to the high $1700 range for the first time since July 7, and the dollar index is also hitting new yearly lows. As of the 27th, gold was priced at $1,788 per ounce, down about 4.8% this month. The dollar index closed at 91.79 on the 27th, falling an additional 2.4% this month, and has dropped about 12% since reaching a yearly high on March 20.

The simultaneous weakness in gold prices and the dollar appears to be driven by strengthened expectations for vaccine distribution and economic recovery. While the decline in gold prices can be interpreted as a signal anticipating liquidity reduction due to visible vaccine rollout, it is more appropriate at this stage to interpret it as a sign of growing optimism for economic recovery and a preference for risk assets rather than liquidity tightening.

Accordingly, various risk assets have recently shown sharp increases. For example, copper prices, which represent the economic cycle, have entered a second rally since the first pandemic wave. Copper prices surged about 11.5% in November alone, surpassing the June 2018 peak of $7,262.5. Oil prices have also fluctuated, and the CRB (Commodity Research Bureau) index has recorded an increase of about 11.2% in November alone.

The money move into emerging assets (risk assets) is expected to continue for the time being. Reasons for the anticipated acceleration of asset movement include the weak dollar trend, the U.S. Federal Reserve's extension of bond maturities, additional stimulus measures by the ECB, the start of vaccination in the U.S. and Europe, and strengthened momentum for China's stimulus policies centered on consumption incentives.

The phenomenon of the Australian dollar hitting new yearly highs, which has a high correlation with the KOSPI, suggests that foreign capital inflow into the domestic stock market may continue for the time being.

◆ Kwanghyun Kim, Researcher at Yuanta Securities = The KOSPI rose about 16.2% in November alone. In terms of points, it increased by 366 points. This is the first time in history that the index has risen more than 200 points in a single month. The market surged significantly due to factors such as maintaining major shareholder requirements, Biden's election victory, and vaccine development news led by Pfizer-BioNTech. Despite the rapid global spread of COVID-19, the market responded more strongly to positive news than negative factors.

Due to the sharp rise in the index this month, the domestic stock market has become the country with the highest annual returns among major nations. Although neighboring stock markets such as Taiwan, Japan, the U.S., and China showed upward trends, most countries recorded negative returns in the global stock market. India and Germany also remained in negative annual returns until last month.

The rise in the index was led by foreigners. Foreign investors net purchased 7.4 trillion KRW worth of semiconductor-related stocks in November alone, the largest amount since September 2013 (7.55 trillion KRW). On the other hand, individuals, who had driven the rebound with net purchases of 46.6 trillion KRW from the beginning of the year until last month, net sold about 5 trillion KRW this month. This is the largest scale since January 2012 (5.6 trillion KRW). Another notable point is the sharp increase in trading volume of the KOSPI compared to the KOSDAQ index. As foreign investors' buying influence expands, their attention is turning to the KOSPI.

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