One of World’s Strongest Rallies Propels South Korea Stocks to 2-Year High
Visitors look at screens displaying stock figures at the Tokyo Stock Exchange (TSE), operated by Japan Exchange Group Inc. (JPX), in Tokyo, Japan. (Photographer: Kiyoshi Ota/Bloomberg)

One of World’s Strongest Rallies Propels South Korea Stocks to 2-Year High

South Korean stocks climbed to the highest level in over two years as one of the world’s hottest rallies continued, fueled by ever-growing demand for technology shares.

The Kospi index gained 1.4% to close at 2,418.67, the highest since June 2018. The gauge has surged 73% in dollar terms since the global market low on March 23, beating all other national benchmarks except Argentina’s.

Kospi’s relative strength is due to South Korea’s success in managing Covid-19, its heavy weighting of tech companies and its “high beta to global recovery,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte. In addition, “the weaker greenback makes the outperformance in U.S. dollar terms appear stronger,” he said. The Bloomberg Dollar Spot Index has dropped about 9% since the March equity low.

One of World’s Strongest Rallies Propels South Korea Stocks to 2-Year High

The Korean market recovery was aided by a less severe pandemic lockdown than in other parts of the world, in addition to global phenomena including low interest rates and an explosion in retail trading. Foreigners have returned also, buying a net $507 million of Korean shares so far this quarter -- this might reflect global tech bargain hunting with the Kospi trading at 14 times 12-month forward earnings estimates, half the Nasdaq 100’s valuation.

Samsung Electronics Co., the nation’s largest stock, has been the biggest boost, surging 37% from its March nadir. The semiconductor giant last month said it sees new smartphones and gaming consoles driving use of memory chips in the second half of the year. The market’s second-biggest booster LG Chem Ltd. has more than doubled this year on a bullish outlook for electric-vehicle batteries, and individual investors have been piling into the nation’s biotechnology names at a rapid clip.

“The market continues to be driven by retail investors,” said Seung Hoon Lee, head of equities at DB Asset Management in Seoul. “In the U.S., the stocks that had been driving the rally are kind of taking a breather but in the case of Korea, prices are continuing to rise centered around rechargeable batteries and biotech industries.”

©2020 Bloomberg L.P.

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