It’s Hard to Find a Loser in Korea and Japan Rallies

(Bloomberg) -- Rally skeptics muttering about poor market breadth are not likely propping up the socially-distanced bars of Seoul or Tokyo. The equity rebound there has been so broad, it’s hard to find a stock that has dropped since the March lows.

Only four out of 788 Kospi members -- 0.5% -- have declined since the South Korean benchmark reached its bottom on March 19. In Japan, just 16 of 2165 Topix stocks -- 0.7% of the index -- are down since March 16. That compares with an equivalent figure of 10% in the MSCI Asia Pacific Index, according to data compiled by Bloomberg.

The measure may provide more confidence to bulls who believe a broad rally is a healthy sign the equity run could be here to stay. The Kospi Index briefly turned green for the year earlier this week and fluctuated around that level Wednesday, while Japan’s Topix Index still has about 5% to go to do the same.

Societe Generale SA. strategists said Japan is the “perfect place to be,” especially in equities, while Korea is also among preferred Asia emerging market bourses, according to a note Tuesday.

And for Dong-Kil Noh, an analyst at NH Investment & Securities, the 50% rally in the Kospi from March still has the legs to rise more given abundant liquidity.

“It seems to be meaningless to talk about earnings outlook,” said Noh. “Local retail investors are leading the rally because they feel reluctant to buy real estate with strong regulations on the housing market in Korea now, so they are turning to stocks instead with an interest rate at a record low of 0.75%.”

Still, the skeptics will have noticed some narrowing of breadth over the past month. The percentage of decliners in the Kospi has risen to 30%, while it has hit 10% for the Topix.

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