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Factors Driving the KOSPI up to a Record High
- Qualitative Factors
- New Market Movers
– Previously, foreign investors dominated the market. However, recently institutions considerably expanded their positions, emerging as a market-leading force. - Undervalued Stock Prices
– Stock prices are undervalued for the national economic fundamentals and corporate values ? Stock prices are being re-rated. - Market liquidity increased as the long-term demand base improved.
– Growing demand for indirect investment instruments increased liquidity at institutions.
- New Market Movers
- Macroeconomic Factors
- Low interest rate regime and brisk exports created favorable macroeconomic conditions.
– Call rate target has been unchanged for 9 months since November 2004.
– Exports have grown at double-digit rates since 2002.
- Government Policies
- Effects of government policies
– Put in place management practices with focus on creating shareholder value
– Encouraged companies to improve corporate governance and accounting transparency
– Introduced a capital circulation cycle centered around the stock market, which can promote balanced development across the financial industry
– Allowed pension funds to invest in stocks and introduce corporate pension systems
– Undertook innovative measures to promote asset management business - Effects of corporate restructuring and reforms of economic systems undertaken since the foreign exchange crisis
– Profit-based management maximized ROE and shareholder value
– Improved corporate governance resulted in greater transparency and efficiency of corporate operations
– Shareholder’s equity-oriented management (Equity Financing)
- Listed Companies
- Consistent improvement in corporate performance as a result of corporate restructuring
– Financial health and profitability of domestic companies significantly improved.
– Global market leadership in various industries based on globally competitive technologies - more diversified portfolios for foreign investors
- Increased investment value of stocks
– Stocks paying high dividends gained increased appeal from investors due to continued drops in interest rates.
– Conditions have become favorable for stock investment as corporate results continue to improve and shareholder-focused management practices become widely spread.
- Investors
- A shift in investment paradigm led to an advanced investment culture taking hold.
– Investors gradually shifted from short-term trading to mid-to-long term value investment, and from direct to indirect investment.
- Low interest rate regime and brisk exports created favorable macroeconomic conditions.
