The Donghak Ant Movement, KOSPI Doubled, Short Selling Ban... Top 10 Stock Market News of the Year

Record-Breaking Individual Investor Boom... KOSPI Surges from 1,400 to 2,800

[Asia Economy Reporter Minwoo Lee] The KOSPI surpassed 2800 for the first time, and the record-breaking participation of individual investors in the stock market, known as the 'Donghak Ant Movement,' was selected as one of the top 10 stock market news stories of the year.

The Korea Exchange announced on the 27th the 'Top 10 News Stories (no particular order) that Influenced the Securities and Derivatives Markets This Year,' based on a survey conducted among accredited reporters.

◆ KOSPI Doubled... Surpassing 2800 for the First Time Ever = Due to concerns over an economic recession caused by the novel coronavirus disease (COVID-19), the KOSPI fell to 1457.64 (closing price) on March 19. However, it soon began to rebound. Supported by the buying power of individual investors and economic stimulus measures from countries around the world, it recovered to pre-COVID-19 levels. As expectations for economic recovery and strong corporate earnings grew, the KOSPI reached a record high of 2602.59 on the 23rd of last month, marking the highest level in 2 years and 10 months. Then, on the 24th, it closed at 2806.86, surpassing 2800 for the first time ever. From the beginning of the year to that day, the KOSPI's rise rate was 27.7%, ranking among the top in the Group of Twenty (G20) countries.

◆ Record-Breaking Individual Investor Participation... 'Donghak Ant Movement' = This year, individual investors bought stocks at unprecedented levels, supporting new highs in the stock market. From the beginning of the year until the 22nd, individual investors net purchased a total of 65.4 trillion KRW in the domestic stock market. This is six times the previous record of 10.9 trillion KRW in 2018. The average daily trading value reached 22.7 trillion KRW. The proportion of individual investors in stock trading also increased by 11.4 percentage points from 64.8% last year to 76.2% this year.

On August 31st, individual investors were waiting for consultation on Kakao Games IPO subscription at the Korea Investment & Securities branch in Yeouido, Seoul. (Provided by Korea Investment & Securities)

◆ IPO Frenzy Targeting 'Ttasant' = As stock prices rebounded sharply from the COVID-19 plunge, interest in IPO investments focused on growth sectors such as pharmaceuticals, bio, gaming, and entertainment surged. The frenzy began with the subscription for SK Biopharm, which went public in July. Subscription deposits from retail investors reached 31 trillion KRW, and on the first day of listing, the stock achieved 'Ttasant' (opening price at double the IPO price followed by hitting the upper price limit), then hit the upper price limit again the next day, fueling the IPO investment enthusiasm. Subsequently, IPOs of Kakao Games and Big Hit Entertainment attracted subscription deposits of approximately 58.7 trillion KRW and 58.4 trillion KRW respectively from retail investors, continuing the frenzy.

◆ Circuit Breaker Activation = As the stock market plunged due to COVID-19, measures to temporarily halt trading were activated. On March 13 and 19, the KOSPI and KOSDAQ indices dropped more than 8% intraday, triggering circuit breakers that suspended trading in the stock market and stock-related futures and options markets for 20 minutes. This was the first time since 2001 for the securities market and since 2016 for the KOSDAQ market.

◆ Short Selling Ban = As stock prices plunged amid concerns over the spread of COVID-19, the government banned short selling on all stocks starting March 16. Additionally, market stabilization measures were implemented, including relaxing limits on the quantity of treasury stock repurchase orders and exempting the maintenance obligation of credit loan collateral ratios to suppress forced sales.

The short selling ban was initially scheduled for six months but was extended until March 15 of next year considering concerns over a resurgence of COVID-19. Meanwhile, on the 9th, the amendment to the Capital Markets Act, including improvements to prevent illegal short selling, passed the National Assembly plenary session.

On April 20th (local time), West Texas Intermediate (WTI) crude oil for May delivery closed at -$37.63 per barrel on the New York Mercantile Exchange (NYMEX) in the United States.
[Image source=Yonhap News]

◆ Surge in Premium Rates of Leveraged WTI Crude Oil ETNs Amid Oil Frenzy = From mid-March to mid-June, the premium rate of WTI crude oil futures leveraged Exchange-Traded Notes (ETNs), which track West Texas Intermediate (WTI) crude oil futures, abnormally expanded to over 700% at one point. As crude oil futures prices plunged sharply, even falling below zero for the first time ever, speculative demand surged to buy WTI crude oil futures leveraged ETNs betting on a rise in oil prices, rapidly depleting the holdings of liquidity providers (LPs).

◆ Gold Prices Hit Record Highs = Due to abundant liquidity and increased demand for safe-haven assets, the price of gold per gram on the Korea Exchange (KRX) gold market set a record high 19 times this year. With increased participation from young investors in their 20s and 30s, the trading volume also broke records four times this year.

◆ Announcement of Financial Tax System Modernization Direction = Starting in 2023, income generated from financial investment products will be uniformly taxed. Capital gains from listed stocks held by small shareholders, which were previously non-taxable, will be fully taxed from 2023. In exchange, the securities transaction tax rate will be reduced to 0.15% from 2023.

The scope of major shareholders subject to capital gains tax on listed stocks was initially planned to be expanded from 1 billion KRW per stock to 300 million KRW, but faced strong opposition. As a result, the current threshold of 1 billion KRW will be maintained.

◆ 'Seohak Ant' Frenzy Investing in Overseas Markets = Amid the sharp rise in the U.S. stock market, individual investors directly entered the market, significantly increasing overseas stock investments by domestic investors. From the beginning of this year until last month, the settlement amount for overseas stocks in the Americas region through the Korea Securities Depository reached 149.9 billion USD (approximately 165.4 trillion KRW), a 441% increase compared to 27.7 billion USD during the same period last year.

◆ Launch of 'K-New Deal' Indices = On September 7, the Korea Exchange announced five New Deal indices, including the 'KRX BBIG K-New Deal Index,' composed of major stocks in the 'BBIG' sectors?battery, bio, internet, and gaming?and related sector indices. Following market interest as future growth industries and the government's announcement of the K-New Deal policy, these sectors led stock price gains this year.

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