The Korea Composite Stock Price Index (KOSPI) has been setting fresh record highs day after day. An analysis said there is room for further gains when compared with past periods over the last 20 years when the KOSPI hit all-time highs.
At 1:28 p.m. on the 12th, the KOSPI stood at 3,390.01. On the 10th, it climbed intraday to 3,317.77, breaking through its previous peak for the first time in 51 months, rose further into the 3,340s the day before, and on this day broke above the 3,390 level for the first time ever.
Concerns about an artificial intelligence (AI) bubble have eased, expectations are growing for U.S. interest rate cuts, and the Lee Jae-myung administration has underscored its will to invigorate the stock market — all cited as drivers behind the KOSPI's rise.
How much longer can the KOSPI's uptrend continue? According to Yeom Dong-chan, a researcher at Korea Investment & Securities, since 2005 the KOSPI has broken through its previous peak three times: January 2011, April 2017 and November 2020.
In January 2011, it reached the previous peak after 40 months and then rose an additional 6%. In April 2017, it broke the previous top after 72 months and gained another 16%. In November 2020, it returned to the prior peak after 34 months and added 27%. This time, it reached the previous peak after 51 months and, as of today's index, is up 2.2%. Based on past cases, this suggests there could be further upside.
Compared with the past, a relatively high share of listed companies on the KOSPI market have hit a 52-week high over the past year. In January 2011, it was 2.5%; in April 2017, 2.3%; and in November 2020, 5.6%. It is currently 5%.
However, Yeom said, "In 2020, when the share of 52-week highs was higher than it is now at the time of setting record highs, the index posted more than a 25% additional gain on the back of low interest rates and rising global asset prices," adding, "There is no need to be uneasy about the fact that the share of corporations at 52-week highs is higher than in the past."
During further advances, the sectors that had led the index higher largely kept their leadership. Yeom said, "Even after the KOSPI set all-time highs in the past, the leading sectors that drove the market up did not falter easily," and added, "If you interpret that corporations with strong momentum can continue to rise, you should keep your focus on corporations where momentum is robust in both share price and earnings rather than on valuation appeal."
Of course, many also say caution is warranted. Lee Woong-chan, a researcher at iM Securities, noted that prices of not only stocks but also bonds and gold, which are considered safe assets, are rising together. The point is that in a situation where stocks feel expensive to buy, yet not buying carries the burden of currency value erosion from inflation, investors are constantly searching for alternatives.
Lee said, "For now, the global stock market is enjoying the AI boom and heated investor sentiment, but it seems we are gradually approaching the end of the bull market," adding, "We should watch out for a U.S. economic downturn and deteriorating earnings outside the semiconductor institutional sector."
With 100 days having passed since the launch of the Lee Jae-myung administration, the "honeymoon" period has effectively ended, a factor that should be considered. The market can move only when results follow policy expectations.
Lee Kyung-min, a researcher at DAISHIN SECURITIES, said, "In the short term, as expectations pass their peak, profit-taking supply may prevail," adding, "The direction of share prices will depend on whether Korea can secure differentiated competitiveness going forward."