KOSPI, which broke through the 5,000 mark early this year, captured the 6,000-point summit in just 18 trading days. The securities industry points squarely to "individual investors" as the top contributors driving this record-setting bull market.
In particular, while foreigners have dumped more than 10 trillion won in shares this year, pressuring the index, household idle funds and the national pension funds are filling the gap and firmly supporting the downside. With the government rolling out a strong "fish trap policy" to channel real estate market liquidity into the stock market, the tilt of funds toward equities is likely to intensify for the time being.
ChosunBiz conducted an emergency survey of heads of research at 11 major domestic securities firms, and research chiefs assessed that retail funds flowing into individual investors and exchange-traded funds (ETFs) are propelling the current explosive rally.
Yun Chang-yong, head of research at Shinhan Investment & Securities, said, "It is entirely thanks to individual investors' MoneyMove," adding, "In particular, a massive influx of individual funds through ETFs is playing a leading role in lifting the market."
Yang Ji-hwan, head of research at Daishin Securities, also said, "Foreign investors are selling semiconductor stocks, but aggressive buying by institutions and individual investors has powered the continued uptrend in semiconductors," adding, "In the end, the complementary supply-demand pattern among foreigners, institutions and individuals has led the KOSPI uptrend."
Regarding the foreign flow that has dumped as much as 1.0457 trillion won in shares this year, the securities industry leans toward "profit-taking" rather than an "exit."
Kim Dong-won, head of research at KB Securities, said, "It is analyzed more as short-term profit-taking than a flight of foreign funds," adding, "Although there has been profit-taking, Korea's stock market stands out the most in valuation advantages among emerging markets now, so there is a high possibility of inflows."
Lee Jong-hyung, head of research at Kiwoom Securities, projected, "Once profit-taking wraps up, there could be additional buying centered on semiconductor corporations."
Lee Jin-woo, head of research at Meritz Securities, said, "It looks like foreigners are selling on a large scale, but because the KOSPI index level itself has already risen, it is hard to see the selling as heavy," adding, "However, whether this will spread across the broader market has some global linkages, so we still need to watch whether it broadens."
As a prerequisite for foreign investors to return to the domestic market going forward, Yoo Jong-woo, head of research at Korea Investment & Securities Co., analyzed that "concerns over foreign-exchange losses will need to be resolved."
Expectations are strengthening that the rally will continue as the government keeps pushing policies to draw funds into the domestic stock market. Recently, the National Pension Service raised its target allocation for domestic equities and decided to defer mechanical rebalancing that would dump domestic stocks even if it exceeds the allowed asset allocation range.
Yang Ji-hwan of Daishin Securities said, "Inflows of long-term funds such as pension funds and retirement pensions can be a main driver of the KOSPI's long-term uptrend," adding, "We should account for short- to mid-term volatility, but over the long run—five to 10 years—we can expect an upward-sloping market."
Park Yeon-ju, head of research at Mirae Asset Securities, said, "Since pension funds have decided to raise their share of domestic equities, there is some expectation," but added, "However, because the KOSPI's surge has already increased its weight, new injections of funds could be limited."
Some also say it is hard to be optimistic about the short-term impact. As the KOSPI has climbed steeply, the valuation of domestic listed shares held by major pension funds such as the National Pension Service has likely already exceeded their allocation limits.
Yang Ji-hwan, the research head, said, "Pension funds could serve as a safety net when a correction comes for the time being, but their power to drive the market higher appears limited."
Lee Jong-hyung, the research head, said, "Pension fund money is likely to affect the KOSDAQ index more than the KOSPI," adding, "That is because the KOSPI has already filled almost all of its domestic equity allocation." He continued, "Since a policy to reflect the KOSDAQ index in recent pension evaluation criteria is being pursued, I think KOSDAQ will see somewhat more benefit."