As the end of the year approaches, the Korea Composite Stock Price Index (KOSPI) shows signs of rebound, but the market generally assesses that the uncertainties that previously suppressed the overall market have not been completely eliminated. Especially after entering late December, market attention has increased regarding the so-called 'Santa Claus Rally' (a phenomenon of a strong stock market at the end of the year), but uncertainties around exchange rates and the artificial intelligence (AI) industry continue to influence the market atmosphere.
In fact, on the 19th, the KOSPI closed at 4020.55 points, up 26.04 points (0.65%) from the previous trading day, successfully achieving a short-term rebound. However, analysts believe it is still too early to determine that a formal upward trend has begun. Especially amid recent net selling by foreign investors, the Bank of Japan's (BOJ) interest rate hike decision and concerns regarding the volatility of exchange rates surrounding this decision seem to simultaneously affect both the foreign exchange market and the stock market.
Although the Bank of Japan raised the benchmark interest rate to 0.75% as the market expected, the yen did not strengthen as anticipated but rather showed weakness. While the result did not bring immediate impact, the medium- to long-term effects of such policy changes on the capital market still need close attention. In particular, the weakness of the yen relates to whether yen carry trade (a strategy of borrowing low-interest yen to invest in high-yield assets) can continue, which may affect asset prices in the Asia-Pacific region.
On the other hand, the US stock market continues to show strength, dominated by technology stocks. On the 19th local time, the New York stock market saw the Dow Jones index rise by 0.38%, the S&P 500 index increase by 0.88%, and the Nasdaq index gain 1.31%. This was a result of Micron's good performance release and news of Oracle's cooperation with ByteDance stimulating positive investment sentiment. Consequently, warmth spread across the entire technology sector, and skepticism regarding the AI industry has temporarily eased.
This global flow has also helped domestic investment sentiment. The MSCI (Morgan Stanley Capital International) South Korea ETF rose by 1.41%, the emerging markets ETF increased by 0.98%, and KOSPI200 night futures ended trading with a gain of 1.45%. The Philadelphia Semiconductor Index also rose by 2.98%, boosting market expectations for the entire technology sector. However, the weak Korean won and concerns about the profitability of the AI industry may still be factors that could put the brakes on the 'Santa Claus rally'.
Experts do not rule out the possibility of a 'Santa Claus rally', but they are more focused on the potential for short-term adjustments. Daiwa Securities researcher Li Jingmin noted: 'Market risk indicators and volatility indexes are fluctuating at relatively low levels, indicating the possibility of turning into short-term risk-averse signals.' He added: 'If we start from the year-end, and the overheating phenomenon in the stock market is somewhat corrected, it may present buying opportunities to prepare for an upward trend in the first half of next year.'
Meanwhile, financial authorities have begun to work on institutional improvements to activate the KOSDAQ market. The Financial Committee announced plans to lower the threshold for institutional investors, such as pension funds, to enter the KOSDAQ market and to provide tax incentives for funds investing in the growth of enterprises. This is expected to enhance expectations for the KOSDAQ market.
This type of flow is likely to amplify the volatility of investment sentiment around the year-end, thereby determining the short-term direction of the market. Predictions suggest that if the unsettling factors are somewhat resolved, starting from early next year, a more stable upward trend may unfold. However, changes in global monetary policy, currency flows, and assessments of the profitability of technology stocks are expected to remain variables.