Center Director Kim Hak-gyun: "Resolving Korea Discount Necessary for KOSPI's Virtuous Cycle"

Kim Hak-gyun, Head of Research Center at Shin Young Securities, to Present 'Meaning and Outlook of KOSPI Reaching 3000' on the 14th

Hakkyun Kim, Head of Research Center at Shin Young Securities

[Asia Economy Reporter Kum Boryeong] As the 'KOSPI 3000 era' has begun, an analysis suggests that issues such as low dividend yields need to be resolved for a virtuous cycle to occur.

On the 14th, at the 21st floor of the Korea Exchange in Yeongdeungpo, Seoul, Kim Hakgyun, Head of the Research Center at Shin Young Securities, presented on the topic "The Meaning and Outlook of Achieving KOSPI 3000" at the event commemorating the breakthrough of KOSPI 3000 titled "KOSPI 3000 Era, The Beginning of a New History."

Kim pointed out that a so-called "money move" has taken place into the domestic stock market. According to the Korea Exchange, during the first six trading days of this year from the 4th to the 11th, direct investment inflows reached 11.3 trillion KRW.

Kim analyzed that this phenomenon is due to structural and cyclical factors. Regarding the nature of stock investment funds, he explained, "Absolute low interest rates and risk-taking (real interest rates at zero or negative), the increasingly distant real estate market, and the phenomenon of 'following friends to Gangnam' (relative deprivation), etc. Low interest rates have transferred household wealth to companies, and the money shift to the stock market is a rational choice in its own right."

He analyzed that collective success experiences are important for a virtuous cycle or resolving the Korea discount. Kim said, "Stock investment booms have always appeared near the peak after prolonged stock price increases. Recently, direct investors have shown a different pattern by increasing their stock holdings at the bottom rather than at the high levels. Markets always have cycles, so one must invest long-term with money that can withstand time."

He identified "low dividend yields," one of the causes of the Korea discount, as a problem. Based on cash dividends in 2019 and closing prices as of the 12th, major countries’ dividend yields were 3.1% in the UK, 2.7% in Taiwan, 2.6% in Germany, and 2.4% in Hong Kong. The KOSPI was only 1%. Kim stated, "Dividends provide the strength to hold and endure stocks even when unexpected corrections occur. Korea’s dividend yield has historically been very low, and the payout ratio of listed companies should be stably maintained in the 30% range."

He emphasized that the global economic challenge is to channel excess liquidity into the real economy. Kim said, "For sustainable growth, the flow of liquidity must be directed toward the real economy."

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