[MarketING] Institutions Buy Ahead of Ex-Dividend Date... Driving the Index

On the 27th, the KOSPI and KOSDAQ started higher, while the won-dollar exchange rate continued its downward trend. Employees are working in the dealing room at the Hana Financial Group Myeongdong Building in Seoul. Photo by Heo Younghan younghan@

[Asia Economy Reporter Song Hwajeong] The KOSPI has continued its upward trend for two consecutive days. This is because institutional investors are actively buying ahead of the ex-dividend date, driving the index higher. With no major events expected by the end of the year, the market is expected to remain quiet, increasing the influence of supply and demand.

Institutions Show Strong Buying Ahead of Ex-Dividend Date

As of 10:20 AM on the 27th, the KOSPI stood at 2,330.54, up 13.40 points (0.58%) from the previous day, marking two consecutive days of gains. The KOSDAQ rose 1.2% to 703.04.

Institutions are leading the index's rise. On this day, institutions have net purchased 409.1 billion KRW. They have maintained a net buying streak for five consecutive trading days. Last week, institutions net purchased 1.33 trillion KRW. This shows that institutions are actively buying ahead of the ex-dividend date. The 27th is the last day to purchase stocks to be eligible for dividends, and the 28th is the ex-dividend date.

Han Ji-young, a researcher at Kiwoom Securities, said, "Considering that the 27th is the last trading day to receive next year's dividends, buying focused on traditional high-dividend stocks as part of a short-term dividend investment strategy will support the domestic market's downside."

On the other hand, individual investors are net selling 465.7 billion KRW. Individuals must reduce their stock holdings to a market value of 1 billion KRW or lower, or lower their shareholding ratio to 1% for KOSPI and 2% for KOSDAQ by this day, which is two trading days before the market closes (on the 29th), to avoid being classified as major shareholders.

Increased Influence of Supply and Demand Amid Trading Slowdown

With the year-end market expected to be quiet due to a lack of momentum, the market is likely to move according to supply and demand.

In particular, trading volume has sharply decreased, leading to a contraction in trading activity, which inevitably increases the influence of supply and demand. According to Daishin Securities, the weekly average trading volume of the KOSPI last week fell to around 6.17 trillion KRW, marking the lowest level since the end of 2020. The KOSDAQ trading volume was only 4.9 trillion KRW. Lee Kyung-min, a researcher at Daishin Securities, analyzed, "When trading volume decreases sharply like this, the influence of supply and demand increases in the short term. In an extremely subdued trading environment, even small sell or buy orders can cause significant market fluctuations."

In this environment of increased supply and demand influence, foreign investors' profit-taking sentiment is a risk factor. As the Q4 pre-earning season begins and earnings forecasts are being revised downward again, valuation pressure is increasing, strengthening foreign investors' profit-taking sentiment. Lee said, "While the relative strength of the KOSPI's 12-month forward price-to-earnings ratio (PER) compared to developed countries has reached its highest level since 2012, the relative strength of earnings forecasts has fallen below previous lows. A prerequisite for a buying strategy at a high PER is stable earnings forecasts, but in this unstable earnings phase, foreign investors' profit-taking sentiment is bound to increase."

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