Updated April. 07, 2014 02:27
Money is returning to stock markets. The capital in stock markets has ballooned. This is due in part to prolonged low interest rates, but mostly is helped by improved global investor sentiment, which boosted inflow of foreign stock investments. There is now optimism of a turnaround of businesses at securities firms where brokerage fee income accounts for a big part in revenue.
According to Korea Exchange and Korea Financial Investment Association on Sunday, daily average transactions at Korea`s stock markets, including the KOSPI and KOSDAQ, topped 6 trillion won (5.7 U.S. billion dollars) last week. Daily transactions had remained at 4 trillion won (3.79 billion dollars) level until late last year, plunging to 3.96 trillion won (3.75 billion dollars) on December 27. However, they recovered to 5 trillion won (4.74 billion dollars) on daily average early this year, and are expected to top 7 trillion won (6.6 billion dollars) soon. On Thursday, transaction reached 6.9 trillion won (6.54 billion dollars), the highest level since October 23 last year at 6.99 trillion won (6.63 billion dollars).
The rally at KOSDAQ market has been more pronounced. Once reached below 1 trillion won (948 million dollars) late last year, daily trading surged to 2.65 trillion won (2.51 billion dollars) on Wednesday. Small and mid-cap shares have recently shown strong increases and attracted huge investments. Kim Seong-no, director at KB Investment & Securities Research Center, said, "While the KOSPI frequently turns downward when it surpasses 2,000 points as investors increasingly engage in sell-offs, the KOSDAQ market has shown steady upward trajectory and thus a more capital inflow."
More investors are now turning to lending to buy stocks. Securities` credit-based loans to investors stood at 4.2 trillion won (3.98 billion dollars) at the end of last year, which now approaches 4.7 trillion won (4.45 billion dollars). Optimistic investors are taking risks and making aggressive investments. Experts say that such lending is increasing in both the KOSPI and KOSDAQ markets.
Stock investors expect a warm breeze to stay for a while, thanks to foreign capital inflows and expectations for the upcoming earnings season. The return of foreign investors are leading to improvements in supply and demand, in turn boosting stock trading. Lee Jae-hoon, senior manager at Mirae Asset Securities, said, "The U.S. will maintain ultra-low interest rates for a while, and the Ukraine crisis is somewhat subdued. Foreign investors are playing the role of invigorating stock markets in emerging economies including Korea."