South Korean stocks bring better returns than real estate and gold investments in the first half of the year

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In anticipation of a rapid economic recovery from the pandemic, South Korean stock markets continued to rally in the first half of this year to bring investors higher returns than relatively low-risk products such as real estate and gold.

The main exchange, Kospi, marked its eighth straight month of growth and surpassed 3,000 points for the first time in January. The index first exceeded 3,300 points in June and set a record high at the close of 3,302.84 points on Friday.

The Kospi has soared 429.37 points or 14.94 percent this year, hitting all-time highs 14 times over the period. It was the second largest six-month growth after the second half of last year – 765.14 points. In percentage terms, it was the fourth-largest jump after a record set in the first half of 2017 of 18.03 percent.

Meanwhile, the high-tech Kosdaq climbed 43.71 points or 4.51 percent in the same period. In April, it exceeded the 1,000-point threshold for the first time in nearly two decades. The secondary market hit 1,012.13 at the close on Friday.

The dollar was the second-best return for Koreans after shares, rising 4.39 percent against the won, boosted by the possibility that the US Federal Reserve will suspend quantitative easing. According to data from the Korea Gold Exchange, due to the fact that some investors preferred relatively risk-free assets, the return on investment in gold was 3.51%.

The average return on real estate investments was lower. The house price index rose to 110.4 in May, up 3.08 percent from 107.1 in January. The average rate on bank deposits remained at around 1 percent during the era of ultra-low interest rates. The Korea Investors Service Composite Bond Index, however, was minus 1.31%.

Keeping pace with the rally in the major equity markets of the Group of 20 countries, Kospi posted the seventh largest gain from January to June, according to market research Infomax.

Argentina’s Merval Index showed the largest growth at 27.15%, followed by the index of all Tadawul shares in Saudi Arabia and the RTS Russia Index with 26.78% and 20.51%, respectively. According to the data, the French CAC 40 is up 19.3 percent.

The Kospi outperformed three major US indices: the Dow Jones Industrial Average rose 12.5 percent, the S&P 500 rose 13.97 percent, and the Nasdaq rose 11.42 percent.

Major indices in neighboring countries rose below the benchmark for Asia’s fourth largest economy. The Shanghai Composite and Shenzhen Composite rose 3.87% and 4.84%, respectively, while the Hang Seng Index in Hong Kong jumped 7.55%. The Japanese Nikkei 225 gained 5.91 percent.

“The Kospi resumed operations, setting all-time highs despite continued volatility in US policy and modest foreign capital inflows,” said Ahn So Eun, an analyst at IBK Securities, adding that the strong gains in the stock were mainly due to the strong benchmark performance.



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