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🇰🇷 South Korea /Economy & Trade

South Korea's Stock Market Hits Records Amid 'Sell in May' Caution

From Hankyoreh · (7m ago) Korean Mixed tone

Translated from Korean, summarized and contextualized by DistantNews.

TLDR

  • The Korean stock market (KOSPI) is experiencing a rally, hitting record highs for three consecutive days, leading to investor deliberation on whether to buy more or take profits.
  • The "Sell in May" adage, originating from Wall Street, suggests lower stock returns in May, prompting caution among investors despite the current market surge.
  • Analysts are divided, with some predicting a potential profit-taking wave in early May due to the recent rapid rise and seasonal patterns, while others see potential for continued gains if new positive catalysts emerge, particularly in the semiconductor sector.

As the KOSPI continues its impressive ascent, reaching new record closing highs for three consecutive days, a familiar Wall Street adage has resurfaced in South Korea's financial circles: 'Sell in May.' This traditional wisdom, suggesting a period of weaker stock market performance from May through October, is prompting a strategic dilemma for investors. While the market's momentum is undeniable, the historical tendency for returns to dip during these months is causing many to question whether to capitalize on current gains or hold on for further appreciation.

Since 2000, the actual average return of the KOSPI in May has been quite low at 0.3%, and the average return from May to October was significantly weaker than in autumn and winter.

— Byun Jun-hoIBK Investment & Securities analyst, citing historical data to support the 'Sell in May' hypothesis for the Korean stock market.

Analysts are closely examining the factors driving the current rally and assessing the likelihood of its continuation. Some, like Byun Jun-ho of IBK Investment & Securities, point to the statistical evidence supporting the 'Sell in May' hypothesis. He notes that since 2000, the KOSPI's average return in May has been a modest 0.3%, with the period from May to October generally underperforming the fall and winter months. Coupled with the KOSPI's significant 30% surge in April, this suggests a potential for profit-taking early in May.

We judge that there is a high probability of returning to the existing downward seasonality from May.

— Lee Gyeong-su and Lee Cheol-hyeonHana Securities analysts, suggesting a potential downturn in the market from May onwards after the semiconductor earnings surge.

However, the market is not without its optimists. The strong performance of key sectors, particularly semiconductors led by giants like Samsung Electronics and SK Hynix, has buoyed confidence. While some analysts anticipate a temporary slowdown in the pace of semiconductor earnings upgrades, others believe that new positive developments in the sector or a broadening of the rally to other industries could sustain the upward trend. The recent dip in US markets, influenced by concerns about AI growth, has introduced a note of caution, but the overall sentiment remains a complex mix of seasonal skepticism and sector-specific optimism, leaving investors to carefully weigh their next moves.

For the KOSPI's upside to open, it is possible when new semiconductor stories emerge after the end of April or when profits spread to non-semiconductors.

— Noh Dong-gilShinhan Investment & Securities analyst, outlining conditions for continued market gains.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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