Analyzing the "Santa rally" period shows that in the past 10 years, "Santa" came to the KOSPI market only four times. A Santa rally refers to stock prices rising around year-end and the start of the new year, and its frequency is about half that of the U.S. market.
Based on data from the Korea Exchange (KRX) information data system on the 22nd, an analysis of the Santa rally period over the past 10 years (2015–2024) found that the KOSPI rose four times during this span.
A Santa rally refers to a bull market that appears over a total of seven trading days, combining "the last five trading days of December and the first two trading days of January." The concept was devised in 1972 by Yale Hirsch and was first used in the "Stock Trader's Almanac," which he published.
There are several interpretations of why a Santa rally appears. First, during the year-end holiday season including Christmas, trading volume declines, so even a small amount of buying can easily push prices higher, according to one analysis. There is also the view that as the year-end settlement of account approaches, institutional investors strongly engage in "window dressing" to improve investment performance by rebalancing portfolios.
The frequency of Santa rallies in the KOSPI market is only about half that of the U.S. market. According to foreign media including the Wall Street Journal (WSJ), since 1950 the probability of a Santa rally in the S&P 500 is estimated at about 78%, with an average gain of 1.3% over that period.
Although the Santa rally tendency has weakened even in the U.S. market recently, the likelihood of gains is still higher than for the KOSPI. According to Korea Investment & Securities, over the past 20 years the probability of gains during the Santa rally period was 75% for the S&P 500 and 60% for the Nasdaq.
"Ex-dividend" is cited as the reason the KOSPI rises relatively less during the Santa rally period. Yeom Dong-chan, a researcher at Korea Investment & Securities, said, "The reason the KOSPI's Santa rally performance lags the U.S. is the December year-end ex-dividend event."
The ex-dividend date is the day dividend rights disappear, usually the day before the record date. If you hold the stock until the day before the ex-dividend date, you can receive dividends, so selling pressure often strengthens starting on the ex-dividend date.
In this Santa rally, some in the securities industry say to focus on the KOSDAQ market instead of the KOSPI. In fact, during the Santa rally period over the past 10 years, the KOSPI rose four times, while the KOSDAQ rose eight times.
Researcher Yeom explained, "Because the KOSDAQ market has a low dividend yield, it is relatively less affected by the ex-dividend, and investors who sold to avoid being designated as large shareholders tend to return as buyers after the ex-dividend," adding, "The KOSDAQ shows a strong trend at year-end."
Expectations are also rising for KOSDAQ revitalization measures the government is pursuing. Shin Hyeon-yong, a researcher at Yuanta Securities Korea, said, "This year, while a large-cap-led bull market has persisted for a long time, the performance gap between small and mid-caps versus large caps, and between the KOSDAQ index versus the KOSPI, has widened to historic levels," adding, "Thanks to policy benefits and the Santa rally, a shift to strength in small and mid-caps and KOSDAQ names is highly likely."
There is also the view that there is no need to be discouraged even if the Santa rally does not come. Jeff Hirsch, the son of Yale Hirsch, who devised the Santa rally, noted on his blog, "If the Santa rally does not come, it tends to be preceded by a bear market or a period when you can buy stocks at lower prices at year-end."