In the last month of 2024, the domestic stock market froze due to the simultaneous exit of individual and foreign investors. Both transaction volume and transaction value decreased compared to the previous month. Although there were factors that could reduce the selling pressure, such as the easing of the year-end major shareholder capital gains tax, analyses indicate that increasing market uncertainty prevented the retention of investors.
According to the Korea Exchange on the 31st, in December, individuals and foreigners net sold 2.968 trillion won and 2.3244 trillion won worth of stocks, respectively, in the KOSPI and KOSDAQ markets. This marks the first time this year that individuals and foreigners have recorded simultaneous net sales in the trillion-won range on a monthly basis. Their selling volume was met by institutions, which net purchased 3.8281 trillion won.
For individual investors, the conditions were created to reduce the selling scale as the year-end major shareholder capital gains tax requirement was eased from 1 billion won per item to 5 billion won. However, it appears that investors who deemed the domestic stock market's revenue poor quickly exited. Notably, in this month, political uncertainties such as the impeachment crisis combined with global economic risks led to exodus from the stock market.
Transaction volume and transaction value also showed a downward trend. In December, the total transaction volume in the domestic stock market was 53.74981 billion shares, and the transaction value was 611.2298 trillion won, both down from November (56.9778 billion shares and 709.4974 trillion won). The average daily transaction value in the KOSPI exceeded 10 trillion won from February to September this year; however, it decreased to 8.7353 trillion won this month. There were only four trading days (the 4th, 6th, 9th, and 12th) this month where the daily transaction value exceeded 10 trillion won.
The market capitalization turnover rate of the KOSPI also recorded a low of 8.73%, the lowest of the year. This indicates that the decline in transaction value has progressed more steeply than the decline in market capitalization. The market capitalization turnover rate is calculated by dividing the total transaction value by the average market capitalization. It rose to 12.06% in July this year but fell significantly to 8.70% this month.
Experts predicted that due to various variables reflected in the market, such as domestic political uncertainties and the strong dollar, the sluggish trend could continue into next year.
Han Ji-young, a researcher from Kiwoom Securities, noted, “The political chaos is ongoing, and the transaction sluggishness up until mid-week due to year-end closures and the New Year’s holidays could increase short-term volatility in the stock market.” The researcher analyzed that partitioning purchases centered on exports that have seen a large drop or interest rate-sensitive stocks such as biotech would be appropriate.
In contrast, given that the stock market has been sluggish this year, some sectors may see valuation attractiveness increase in the new year, coupled with expanded share buybacks and potential stock price rises due to economic stimulus measures.
Kim Seong-no, a researcher at BNK Investment & Securities, stated, “The valuation levels of semiconductor, automotive, and financial sectors, which have a high market capitalization proportion, are at a low level, and the recent increase in foreign selling this month has intensified the undervaluation,” adding, “As policies to enhance corporate value (valuation) are expected to strengthen next year, share buybacks could increase to 20 trillion won.”