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S. Korean stock market posts record-high market cap; SK biopharm added to MSCI

By Nov 11, 2020 (Gmt+09:00)

3 Min read

South Korea's benchmark Kospi reached a two-year high closing at 2485.87 points on Nov. 11, posting an eight-session winning streak driven by imminent COVID-19 vaccine development and hefty buying from foreign and institutional investors.

Alongside reaching its highest since May 2018, Kospi alongside the tech-heavy junior Kosdaq, saw its combined market capitalization climb to a historic high of 2032.3 trillion won ($1.8 trillion). Kospi posted a market cap of around 1,704 trillion won while Kosdaq's market cap stood at 328.4 trillion won, according to the Korea Exchange.

Kospi touches two-year high at 2,485.87 points
Kospi touches two-year high at 2,485.87 points


"The Kospi index is lower than its record-high of 2598.19 points, but new companies were listed in the past two years, which helped set a fresh record based on the total market cap,” said a Korea Exchange official.

Foreign investors and institutional investors were the driving forces behind the Kospi rally rise as they scooped up shares of net 837.3 billion won and 401.8 billion won, respectively. Individual investors offloaded shares of a net 1.2 trillion won to see gains. 

Among the highest market caps were Samsung Electronics Co. and biosimilar maker Celltrion Inc. which rose 1.83% and 7.23%, respectively.

Also, sectors that were heavily hit by the global pandemic such as airlines, travel and retail saw positive share price movements. Domestic airlines Korean Air Lines Co. and Asiana Airlines Inc. saw their share prices jump by 5.98% and 10.13%, respectively.

Market experts forecast the domestic stock market rally to carry over to next year backed by increased anticipation for rebounds in the economy and company performances.

THREE KOREAN COMPANIES ADDED TO MSCI INDEX

SK Biopharmaceuticals Co., SK Chemicals Co. and Doosan Heavy Industries & Construction Co. have been newly added to the Morgan Stanley Capital International (MSCI) Korea index, fueling hype over massive inflows driven by foreign investors' index investing.

According to the MSCI semi annual index review on Nov. 11, other South Korean companies including Amorepacific Corp., BNK Financial Group Inc. and Posco International were removed from the index, with around a combined 1 trillion won ($899 million) of outflow expected.

The MSCI Index determines which stocks to add or remove based on the company’s market capitalization and the free-float market cap.
SK Biopharm's research lab
SK Biopharm's research lab

SK Biopharm, SK Chemicals and Doosan Heavy will each account for 0.04% in the MSCI Emerging Markets index which covers large and mid-cap stocks across 26 emerging markets. NH Investment & Securities estimates each company to see 106.4 billion won of passive inflow after being added to the index.

Despite passive inflow expectations, some of the newly added companies performed poorly on Wednesday. In particular, SK Chemicals closed at 405,000 won, down 11.18%, due to the announcement that its bigger rival Pfizer’s coronavirus vaccine in development has shown to be highly effective based on its clinical trials.

SK Chemicals shares have risen substantially on anticipation that it will secure a contract manufacturing organization order for UK-based AstraZeneca's COVID-19 vaccine candidate.

Market experts, however, say that there is still a chance for the newly added companies to see a rise in share price until the index change takes place. The index rebalancing is set for Nov. 30.

Write to Ye-rin Choi, Bum-jin Chun and Jae-yeon Koh at rambutan@hankyung.com
Danbee Lee edited this article.
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