Korea’s benchmark stock index rises 10% in 2021

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SEOUL, Jan. 11 (UPI) — Despite ongoing COVID-19 stressors and weeks of state-mandated social distancing, South Korea’s representative stock market index has risen about 10 percent this year.

After topping 3,000 points on Wednesday, the third trading day of 2021, the KOSPI continues to rise, surpassing 3,100 points on Friday and 3,200 points early Monday.

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The benchmark index has been on the rise for at least the last 10 weeks in a row, since the first week of November.

Abundant liquidity, a buying binge of individual investors and the projected economic recovery are touted as the major reasons behind the unusually bullish run.

Meritz Asset Management CEO John Lee said, “The KOSPI index should eventually reach 10,000.”

As a former Wall Street fund manager, Lee is a famous evangelist of stock market investments in South Korea.

Lim Byung-hyo, an analyst at Korea Investment & Securities, said investors don’t have to sell off their stocks right away.

“During the first quarter of this year, we expect that investors would prefer risky property,” he said. “The global economy is set to enter the expansionary phase after going through the recovery phase.”

But some warn of bubbles in the stock market as the price-index ratio of the total stock market approaches 15. The ratio typically has fluctuated in the vicinity of 10.

Professor Kim Young-ik of Sogang University said the country’s overall stock values are overrated by around 30 to 40 percent. Securities analyst Lee Kyung-min agreed.

“The share prices have surged too fast. It is the time for the market to take a rest,” he said.

Against this backdrop, Hwang Sei-woon, a researcher at the Korea Capital Market Institute, said South Korea should lift a ban on short-selling immediately.

“The domestic stock values have gained too fast, generating concerns about bubbles. We are required to allow short-selling right now,” Hwang said.

Last March, the country’s regulators imposed a ban on short-selling of shares listed on KOSPI and smaller exchanges amid the stock market panic due to the COVID-19 pandemic. Midway through last year, the country extended the ban for six more months, through March 2021.