Cold Wind in the Stock Market... Deposit Turnover Rate at 31%

[Asia Economy Reporter Hwang Junho] As stock market trading volume decreases, the turnover rate of deposited funds has also declined. This phenomenon has emerged as the KOSPI retreats to the 3000 level, signaling a chill in the stock market. The securities industry analyzed that investors need to adopt strategic responses.

According to the Korea Exchange on the 29th, as of the 27th, the turnover rate of investor deposited funds in KOSPI and KOSDAQ stood at 31.56%. The turnover rate has gradually decreased since recording 47.38% on the 9th. The turnover rate is an indicator showing the level of trading volume relative to deposited funds, with levels above 40% considered a point where the stock market is stimulated.

The recent decline in turnover rate is analyzed as a result of a sharp drop in trading volume due to frozen investor sentiment, as the KOSPI retreated to the 3000 level. KOSPI trading volume decreased from 15.7873 trillion KRW on the 14th to 12.267 trillion KRW on the 27th. The average trading volume this month is in the 14 trillion KRW range. KOSDAQ trading volume, which averaged over 10.5 trillion KRW this month, also shrank to 9.3911 trillion KRW on the 27th. Meanwhile, deposited funds have maintained average levels. The average deposited funds this month are 68.3216 trillion KRW, and on the 27th, they were recorded at approximately 68.2185 trillion KRW.

The decrease in trading volume is attributed to a decline in investor sentiment toward the stock market. With no clear positive factors, issues such as the bankruptcy of China’s Evergrande Group, the U.S. tapering (asset purchase reduction) scheduled for Q4 this year, and judgments on the peak-out of earnings momentum have led to weakness in the KOSPI, intensifying anxiety. The KOSPI recorded 3097.92 the previous day, falling below the 3000 level for the first time since the 27th of last month.

However, this decline in turnover rate not only indicates a drop in market expectations but can also be interpreted as meaning that there is a significant amount of funds ready to be injected when the time is right. The securities industry views the current situation as a period of increased short-term volatility.

Lee Kyung-min, a researcher at Daishin Securities, said, "Currently, anxiety about the economy is at its highest, and with the added variable of rising interest rates, the market is suffering from increased short-term volatility. Going forward, as the recovery in consumption and manufacturing becomes visible and the pace of interest rate hikes is controlled, the stock market is expected to resume an upward trend based on fundamentals."

Kim Yong-gu, a researcher at Samsung Securities’ Global Investment Strategy Team, analyzed, "The current Morgan Stanley Capital International (MSCI) Korea Index’s 12-month forward price-to-earnings ratio is around 11.2 times, which not only ignores the virtuous cycle of fundamentals driven by exports but also falls short of pre-pandemic levels." He added, "Even assuming market valuations fall to historical averages, the KOSPI should be able to maintain the 3000 level. Below 3100, holding rather than panic selling is necessary, and buying rather than waiting will be helpful."

Lee Jae-yoon, a researcher at SK Securities, said, "Over the past month, operating profit and net profit estimates for KOSPI in Q3 and Q4 of this year have been revised upward, but estimates for next year have been revised downward." He added, "As the earnings momentum of KOSPI slows, stock price differentiation is expected among sectors or stocks with high potential for earnings improvement." Accordingly, he recommended sectors such as transportation, steel, and IT home appliances, noting, "These sectors have shown significant upward revisions in earnings estimates for the second half of this year and next year."

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