After a global-leading rally, South Korea’s US$4.9 trillion equity market is
showing strain. The KOSPI hit a record high on Tuesday even as only 2.6% of
stocks traded at 52-week highs while 31% were at 52-week lows, signaling a
narrow advance. Retail participation is cooling and surging margin loans face
Downside risk if the Bank of Korea raises rates in July. Investors warn that a
market downturn could be as rapid as the prior rise. Ha Seok Keun, chief
investment officer at Eugene Asset Management, said he is more worried by
overheated positioning than by fundamental deterioration and expectations heightened
volatility and consolidation over the next one to two months.
