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Kospi market cap

S.Korea's stock market cap tops nominal GDP for the first time

Jan 03, 2021 (Gmt+09:00)

S.Korea's stock market cap tops nominal GDP for the first time

The combined value of South Korea’s main stock market, which wrapped up last year at its highest-ever closing level, topped the country’s nominal gross domestic product for the first time in early December and is estimated to have remained above the GDP level through to the start of this year.  

The total market capitalization of Kospi-listed companies swelled by 260 trillion won ($239 billion), up 15%, to 1,980 trillion won as of Dec. 30, the last trading day of 2020, compared to a year earlier. 

The market cap represented 104.2% of the country's nominal GDP of 1,900 trillion won estimated by the International Monetary Fund, according to the Korea Exchange on Jan. 1.

That was the highest ratio of the Kospi's total capitalization to GDP since 2007, when the combined market value of Kospi-listed companies represented 94.5% of the nominal GDP.

The market cap first topped the nominal GDP on Dec. 11, 2020. In comparison, South Korea’s nominal GDP is projected to have contracted slightly last year, compared to 1,919 trillion won in 2019, hit by declining exports.

The total stock market cap ratio to GDP is called the Buffett Indicator and used to determine whether the market is undervalued or overvalued compared to the historic average. When the ratio rises above 100%, the stock market is seen as overvalued, while below 80%, undervalued.

Including the junior Kosdaq market's cap, the combined market cap of 2,366 trillion won is equivalent to 124.5% of the nominal GDP.

Samsung Electronics Co., which accounted for about a quarter of the market cap, saw its market value rise by 45%, or 150 trillion won on the year, to 483.5 trillion won as of the end of Dec. 30.

Retail investors became the main buying force amid ultra-low interest rates and toughened regulations on real estate investment. They bought a net 47.78 trillion won worth of shares last year, absorbing most of the selling by foreign and institutional investors during the same period.

The benchmark Kospi index ended up 1.88% at 2,873.47 last Wednesday, posting a 31.1% gain for all of 2020. Both the Kospi and the Kosdaq markets rose the most among major equity markets, including the S&P 500 and the Nasdaq last year.

Last month, JPMorgan expected the Kospi index to extend its bull run to 3,200 points this year, citing ample market liquidity and expectations for economic recovery once the COVID-19 pandemic subsides.

Meanwhile, South Korea's exports dropped by 5.4% on the year in 2020, marking the second consecutive year of declines, the country’s trade ministry said on Jan. 1. But the faster pace of import falls widened the country’s trade surplus by 17.3% to $45.6 billion. 

Write to Ji-Yeon Sul at sjy@hankyung.com

Yeonhee Kim edited this article.

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