Korean Market Resilience: Economic Surges and Regulatory Vigilance

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Korean Market Resilience: Economic Surges and Regulatory Vigilance

The Kospi index in South Korea experienced a surge to 2,683 points just a few days ago, marking its highest level since May 31, 2022. However, it encountered a setback yesterday, slipping to 2,657 points. Despite this slight decline, the index has shown remarkable growth, rallying by nearly 10% since hitting its low point on January 18 of this year (2,429 points) up to the close of yesterday’s session (2,657).

Several key economic indicators in Korea have outperformed analysts’ predictions, including exports, the unemployment rate, and consumer confidence.

Investors are eagerly awaiting the upcoming interest rate decision from the Central Bank of Korea scheduled for next Tuesday, with prevailing expectations leaning towards the maintenance of the current interest rate at 3.50%.

Calls for increased transparency in government actions concerning corporate governance, particularly for publicly listed firms, have grown louder. There is also a clear emphasis on publicly condemning those who flout these regulations. This renewed focus has had a positive impact on Korean stocks, as evidenced by the substantial influx of foreign investment into these stocks.

It is worth noting that Korean regulatory bodies have implemented a sweeping ban on short-selling activities from October 6, 2023, until June 2024. This measure is aimed at curtailing the misuse of this trading strategy by hedge funds and investors on a global scale.

From a technical perspective, the outlook for the Kospi index appears promising. A golden cross was observed between the 50-day moving average (blue) at 2,556 points and the 200-day moving average (yellow) at 2,533 points, signalling an upward trajectory for the index.

The Relative Strength Index (RSI) stands at approximately 64 points, comfortably exceeding the 50-point threshold, indicating a favourable momentum for the index.

The Positive Directional Movement Index (DMI+) is hovering around 36 points, while the Negative Directional Movement Index (DMI-) is approximately 16 points. The significant gap between these two indicators suggests robust buying pressures on Korean equities. Moreover, the ADX trend strength index sits at around 30 points, surpassing the 25-point mark, indicating a strong momentum for this upward trend.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.