[KOSPI 3000] Steadily from 100... A New Milestone in 38 Years

[Asia Economy Reporter Koh Hyung-kwang] 3000. The KOSPI opened a new chapter in its 38-year history since its launch. This achievement was earned steadily by overcoming waves such as the International Monetary Fund (IMF) bailout crisis, the Information Technology (IT) bubble burst, and the global financial crisis.

The stock index has been calculated since early 1964, 57 years ago. At that time, it followed the Dow Jones method, calculating the index based on some selected blue-chip stocks among listed companies. However, due to concerns about representativeness, it was revised three times over 19 years, and in 1983, the current KOSPI index, based on market capitalization, was born. On January 4 of that year, the first closing price of the KOSPI, which was launched with the market capitalization from three years prior as the base (100), was 122.52. Expectations for the new index were high, but the KOSPI ended its first year with a 4.8% decline.

The KOSPI's upward rally began in the mid-1980s. At the end of 1985, the KOSPI was only 164, but by the end of 1986, it rose to 272, and just over eight months later, on August 19, 1987, it surpassed the 500 mark for the first time. Two years later, on March 31, 1989, it broke through 1000 for the first time in history. In the 1980s, the KOSPI was driven by three sectors: construction, finance, and trade. These sectors, known as the 'Troika,' became the protagonists of the bull market based on the three lows (low dollar, low interest rates, and low oil prices).

After fluctuating, the KOSPI plunged sharply at the end of 1997 during the country's greatest crisis, the IMF crisis. On December 3, 1997, when the IMF bailout agreement was reached, the index was at 379.31, and by June of the following year, it plummeted to 277.37, the lowest point since 1987.

As the Korean economy recovered from the foreign exchange crisis shock, the KOSPI gradually revived. In 1999, the stock market surged amid the IT investment boom. The KOSPI quickly regained the 1000 mark and seemed ready to soar again. However, in 2000, the global IT bubble burst, compounded by the aftermath of the credit card crisis, causing the KOSPI to fall again. On April 17, 2000, the index dropped more than 10%, triggering the first-ever circuit breaker. Additionally, the September 11, 2001 terrorist attacks in the U.S. occurred. The day after the attacks, the KOSPI plunged 12% in a single day, falling to the 400s.

From the mid-2000s, as the global economy recovered and global liquidity was supplied, the KOSPI regained its upward momentum. It recovered the 1000 mark in 2005, and with the influx of long-term investment funds due to the installment fund craze, it surpassed 2000 for the first time on July 25, 2007.

However, in 2008, it faced another major crisis. The global financial crisis began with the bankruptcy of Lehman Brothers in the U.S., causing the KOSPI to plummet. The index, which hovered around the 1900s in May that year, plunged to 892.16 by the end of October. On October 16, the KOSPI dropped 126.5 points (9.3%) in a single day.

Afterwards, the KOSPI revived thanks to the performance of the 'Cha-Hwa-Jeong' sectors (automobile, chemical, and refining). With foreign capital flowing into Asian emerging markets and the domestic and international economy recovering, the KOSPI soared to an all-time high closing price of 2228.96 on May 2, 2011. However, shortly after, due to the downgrade of the U.S. credit rating and the European fiscal crisis, the KOSPI fell below 2000 again. It remained stuck in a 'Boxpi' (KOSPI trapped in a trading range) for six years until it broke the previous high with 2241.24 on May 4, 2017.

At the end of January 2018, it touched 2600 intraday for the first time, but the U.S.-China trade dispute caused it to fall again, and the Boxpi trend between 2000 and 2300 continued for another two years. Last year, the unprecedented COVID-19 pandemic froze the global economy, and the KOSPI collapsed helplessly. The index, which was in the early 2000s in early March, plunged to 1457.64 in about 20 days, breaking the 1500 mark for the first time in 10 years. Afterwards, the KOSPI quickly rebounded in a 'V' shape on expectations of economic recovery. It recovered the 2000 mark in May last year, surpassed 2600 in November, breaking the previous record, then exceeded 2800 in December, 2900 on the 4th of this month, and finally, at the start of trading on that day, it reached the 3000 mark for the first time in history. The KOSPI market capitalization, which was only 3.49 trillion won at launch, expanded 590 times to 2065 trillion won based on the 3000 mark on that day.

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