The domestic stock market had a favorable wind in the first half of the year due to expectations for interest rate cuts in the United States and hopes for economic stimulus measures in China, but it plummeted after events such as the August 'Black Monday,' the election of Donald Trump as President of the United States in November, and the declaration of a state of emergency in December. Since the beginning of the year, 67% of companies listed on the securities market have seen their stock prices decline, while the KOSDAQ index has seen an 80% drop. Investors who started stock investments with expectations of reaching '3,000 points (KOSPI 3000)' at the beginning of the year are likely to face losses.
The martial law that recently caused a downturn in the stock market is coming to an end with the passing of the impeachment bill against President Yoon Suk-yeol by the National Assembly, but projections show uncertainty about whether it will lead to a bull market in the future.
According to the Korea Exchange on the 16th, as of the 13th of this month, 1,942 out of a total of 2,607 listed companies (including those under transaction suspension) had declined compared to the end of last year. This represents 74.5%, which is more than a 20 percentage point increase from last year's 50.4% (1,264 out of 2,510) listed companies whose stock prices fell.
In the case of the securities market, 633 out of a total of 946 stocks (67%) declined, 11 remained unchanged, while 302 increased compared to the end of last year. The number of rising stocks did not even reach half of the declining stocks. In the KOSDAQ market, 1,308 out of 1,661 stocks (79%) fell, indicating that the situation is even worse. Only 36 remained unchanged, and only 317 stocks have risen this year.
While individual issues of listed companies may have played a role, the overall impact of various negative factors shaking the stock market from the second half of the year was significant. In the first half, expectations for external positive factors such as U.S. interest rate cuts played a major role. The KOSPI index soared from 2,655.28 at the beginning of the year to 2,891.35 on July 11. However, after that, concerns about the possibility of a U.S. recession, fears of liquidation of the 'yen carry trade' (borrowing funds in low-yield yen to invest in high-yield assets), and worries about the strengthening of protectionism by President Trump coincided and the index began a downward trend.
President Yoon Suk-yeol's declaration of emergency has even crushed hopes for a year-end Santa rally. The KOSPI index plummeted to 2,360.58 (closing on December 9) during the impeachment period, marking the lowest price in 13 months since November 2 of last year. On the same day, the KOSDAQ index fell to 627.01, returning to the early pandemic levels of the global stock market crash caused by COVID-19. This is the lowest level since April 16, 2020 (623.43).
Compared to major global stock markets, the domestic stock market appears to have been more severely shaken by internal and external negative factors such as export slowdowns, Trump risks, and political instability. From the beginning of this year until the 13th of this month, stock markets in neighboring countries such as Taiwan's weighted index (28.4%), Japan's Nikkei 225 (17.9%), Hong Kong's Hang Seng (17.2%), the United States' Dow Jones (16.3%), China's Shanghai Composite (14.0%), and Euro Stoxx 50 (9.9%) have mostly risen.
The passage of the impeachment bill has alleviated some political uncertainty, but opinions in the securities sector vary on how much of a rebound can be expected in the stock market. Kang Hyun-ki, a Research Institute at DB Financial Investment, noted, “Korea's export growth rate is declining, and (due to the president's suspension of duties) the control tower for trade negotiations with the Trump administration's second term has weakened, making it difficult to expect a sustained upward trend beyond a temporary rebound for the domestic stock market in the near future.”
Hana Securities predicted a recovery to the 2,600 level, which is the beginning of the year level. Lee Jae-man, a Research Institute at Hana Securities, stated, “Considering the possibility of a rate cut by the U.S. Federal Reserve on the 18th, the market is expected to rebound, focusing on sectors where next year's net profit is expected to increase among stocks that have had excessive losses this year.”
Cho Jun-ki, a Research Institute at SK Securities, commented, “It is somewhat ambiguous to expect a significant rebound from the approval of the impeachment bill,” and added that “over time, the domestic stock market will likely align with global trends.”