As this week marks the end of the year and the start of the new year, expectations and concerns are set to intersect in Korea's stock market. Hopes for a semiconductor boom are pushing the market back toward record highs, but sharp swings in the exchange rate and the year-end ex-dividend period could increase index volatility.
Lee Kyung-min at Daishin Securities Co. said, "The KOSPI has seen its valuation pressure ease after a pullback since reaching the 4,200 level in early Nov.," adding, "The 12-month forward price-earnings ratio (PER) stands at 10.1 times, below the three-year average of 10.3 times. In particular, as earnings forecasts are being raised quickly, led by semiconductors, the market is entering a phase with greater upside potential."
However, investors should keep in mind that Korea's market could enter a short-term volatility phase this week due to the ex-dividend period. With the 26th serving as the year-end dividends record date for December fiscal-year companies, there is a possibility of profit-taking, especially in high-dividend stocks, after the ex-dividend date on the 29th, when the right to receive dividends disappears.
Last week (Dec. 22–26), the domestic market strengthened on hopes for a so-called "Santa rally." The KOSPI started at 4,096.26 points on the 22nd and finished trading at 4,129.68 points on the 26th. On a weekly basis, the KOSPI rose 2.7% and the KOSDAQ gained 0.48%.
A major driver was the easing of exchange-rate pressures that had weighed on the market, thanks to verbal intervention by the government. As the won-dollar rate, which had topped the 1,480-won level, plunged into the 1,440-won range, foreign funds flowed in. During this period, foreigners posted net purchases on the KOSPI market for four straight trading days. Analysts also say investor sentiment improved quickly as the government's market-boosting measures kicked in.
Investors are keen to see whether the rally will continue this week. Although the 29th is the ex-dividend date, some say the shock may be smaller than in the past. With the implementation of measures to streamline dividends procedures, record dates have been spread out. In fact, as of last year, 98 constituents of the KOSPI200 set their dividends record date for the first quarter around their annual shareholders meetings, rather than year-end.
The researcher said, "The impact of the ex-dividend will differ by stock depending on the record date," and advised, "If a stock shows an excessive drop relative to its dividend around Dec. 29, it can be approached as a buying opportunity."
On the 31st, minutes from the December U.S. Federal Open Market Committee (FOMC) meeting will be released. The minutes are expected to shed light on the rationale behind this month's 25 bp (1 bp = 0.01 percentage point) rate cut and the future path of monetary policy. In particular, if discussions on buying Government Bonds to stabilize the short-term funding market or ending quantitative tightening (QT) become more concrete, expectations for a liquidity rally early next year could grow.
On the market holiday of Jan. 1 next year, Korea's December consumer prices and export results will be released. While inflation is expected to slow, the burden of import prices due to the strong dollar-won rate persists, leading to projections that expectations for a Bank of Korea base rate cut will remain limited for the time being.
Kim Yu-mi at Kiwoom Securities said, "Exports are expected to continue their solid trend, led by semiconductors, and support overall results, but some industries such as petrochemicals and refining are likely to remain relatively weak."
The first trading day of the new year is Jan. 2. Lim Jeong-eun at KB Securities said, "At the start of the year, trading volume may be somewhat thin and a wait-and-see mood may continue," but added, "Customer deposits, the cash parked on the sidelines for the market, remain high at the 80 trillion won level, so a positive view on the domestic market still holds, and we see ample room for further gains."
Meanwhile, during the early-year search for market leaders, expectations for "CES 2026," which opens on Jan. 6, could be reflected. As CES, the world's largest information technology (IT) and home appliance exhibition, is where next-generation technologies from global big tech and startups are unveiled, investor attention is expected to focus on related companies. Early this year as well, sectors tied to the CES opening theme rose sharply.
The exchange-rate trend is also cited as a key variable that will determine the market's direction this week. Kwon A-min at NH Investment & Securities said, "Government intervention has eased fears that the rate could break above the 1,500-won level," adding, "Even if the year-end closing level forms in the mid-1,400 won range, there is room for an additional drop to the low-1,400 won range early in the year."