Rapid Increase of Stock Price Recovered 670 Points

Korean Composite Stock Index (KCSI) has risen for 6 consecutive days and recovered 670 points, and Kosdaq Index also has risen for 5 consecutive days to 50 points.

It is the results of the concurrent increase of world stock market such as US Europe, Japan, etc and net purchasing position of foreign investors with 500 billion won.

At 18th, KCSI closed at 670.79 points increased by 26.13 points (4.05%) KCSI has increased by 86.75 points (14.9%) for 6 days, and recovered 670 points first since 24th of September (672.28 points).

Kosdaq Index closed 50.21 increased by 1.78 points (3.68%). The index increased by 6.54 points (15.0%) for 5 days.

The net purchase of 507.9 billion won by foreign investors in the stock market resulted in increase of stock price. The amount is the biggest since April of 2001 (671.5 billion won). Foreign investors also were on net position in KOSPI 200 Futures by purchasing 5,349 cases (224.6 billion won) and in Kosdaq by 22.7 billion won.

The items risen were 723 in stock market and 688 items in Kosdaq. The number of items risen was much more than declined (96 items in stock market and 91 items in Kosdaq). The transaction amount was 3.702 trillion in stock market and 1.164 trillion in Kosdaq.

▽ The possibility of 750 points in KCSI = Park Kyung-min, President of Hangaram Investment Advisors forecasted “KCSI has been dropped below 700 points without transaction, and foreign investors is expected to purchase Samsung Electronics further, the recovery over 750 points will be possible.”

▽ Ham Chun-seung, Senior Executive of SSB, also forecasted, “Korean Stock Market dropped much below the appropriate value because of the decline tendency of World Stock market. However, because of the stabilization of US Stock Market, foreign investors will begin to purchase the stocks, and it will recover over 750 points easily.”

Lee Jung-ho, Team Leader of Investment Strategy Team of Mirae Assets Securities indicated “The importance is not how much the index increase, but is how long foreign investors last net purchasing position”

▽ World Stock market is under liquid condition by the end of this year= Stock market experts forecast that fund in the economy will inflow into stock market and force the stock price up by the end of this year.

It is happens because each government in the world increases monetary to avoid ‘Bank Crisis’ and it drops interest rates.

Lim Song-hak, Team Leader of Investment Strategy of Kyobo Securities forecasted, “US FRB decreased interest rates by 0.5% immediate after 9-11 Terrorism and decreased interest rates 4 times by 1.75% and increase monetary by the end of 2001. Therefore, Dow Index increased rapidly.” and added, “In this time, the sufficient liquidity will last by the end of this year.”

A expert of Mogen Stanley also forecasted “The increasing tendency will last by the end of this year and S&P 500 Index will reach 1,100 points.”

Bratt Kellehur, the Executive Director of Julius Assets commented “Fund managers will be on net purchasing position to increase profit rate of fund by the end of this year. So they will generate the increase of stock price.”

▽ Need to wait for long term increase = It is indicated that for KCSI to increase over 750 points, negative factors should be solved.

Chung Eui-suk, Senior Research of Good Morning Shinhan Securities indicated, “The only problem solved is US Stock Market, other factors should solved for the index to rise over 750 points.”

Chan-Sun Hong hcs@donga.com