Donghak Gaemi, the Hero Behind KOSPI Surpassing 2700

Unprecedented Case... Corporate Earnings Expected to Improve Next Year

On the afternoon of the 11th, the index was displayed in the Hana Bank dealing room in Jung-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] An analysis has emerged that individual investors are the key players who can break the KOSPI's decade-long stagnation and push it past the 2700 mark.

On the 15th, Kim Hak-gyun, Head of the Research Center at Shin Young Securities, made this claim at a forum titled "Discussing the Current and Future of KOSPI's Record Highs," jointly hosted by the Korea Exchange and the Korea Financial Investment Association. He explained that the reason KOSPI ranked 4th among 25 major countries worldwide in terms of stock market gains amid the global stock market rebound following the outbreak of COVID-19 was not only due to effective COVID-19 containment and strong performances by companies like Samsung Electronics but also because of the active participation of individual investors.

Kim emphasized, "There is a saying that 'when individuals buy, it's the market top,' but this year is an exceptional case where despite foreign and institutional selling, individuals have driven the stock prices up." He added, "Previously, the stock investment craze appeared near market peaks, but this year is the only case where individuals increased their stock holdings from the bottom, and the collective experience of success by waiting patiently is important."

Kim estimated that the actual capital inflow from individual investors amounts to approximately 84 trillion won. He explained, "From 2005, during the stock fund boom, about 96 trillion won flowed into the stock market over roughly four years. This year, the funds that previously flowed in as stock funds have come in as direct investments."

He forecasted that corporate profits will increase next year. Kim predicted, "Macroeconomic indicators and corporate earnings are likely to improve compared to this year. Next year, corporate net profits are expected to reach 134 trillion won, about a 45% increase from this year's forecast of 92 trillion won."

However, he believed that the domestic stock market cannot avoid a correction. He explained, "Although corporate net profits are lower than the record 153 trillion won in 2017, the stock price index has reached an all-time high, so it is difficult to say the market is still cheap. If the global stock market undergoes a correction next year, it will be hard for Korea to avoid one as well."

He advised paying attention to investments in the Green New Deal and Environmental, Social, and Governance (ESG) sectors. Kim stated, "As liquidity flows into asset markets rather than the real economy, asset inequality issues are bound to worsen. There will be investment opportunities as the government sets the agenda."

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