(Bloomberg) -- South Korea's Kospi index is close to erasing a year-to-date loss of as much as 34%, helped by traders betting on a global rebound and the nation's temporary ban on short-selling.
The gauge rose and briefly wiped out its 2020 decline in early trading Monday, becoming the first equity benchmark in Asia to do so. The Kospi closed up 0.1% in Seoul, less than 1% away from being in the green for the year. Samsung Electronics Co., the nation's biggest stock with a 24% weighting in Kospi, fell 1.1%.
The nation's benchmark measure has jumped about 50% from its March low. Individual investors have added 25.7 trillion won ($21.3 billion) of Kospi stocks this year, while overseas traders have offloaded a net 23.2 trillion won.
Among emerging markets, South Korea is the biggest beneficiary of global reopenings following coronavirus lockdowns, according to Jefferies Financial Group Inc. In addition to help from a decline in the U.S. dollar, steeper U.S. bond yields and expanding money supply in China, Korea stands out as it has been able to fight the virus better than peers, the broker said in a note last week.
Korea's ban on short-selling for six months from March 16 also appears to be buoying the market, according to a note from Shinhan Investment & Securities. Kospi may face a correction if the ban is eased, given it slipped about 9% on average when regulators lifted previous such restrictions, the broker said.
Earnings of Kospi members are unlikely to show a “V-shaped recovery” because of slowing growth in China and lingering Sino-America trade tensions, said Jiwoo Lim, a strategist at Korea Investment & Securities. Total net income of Kospi members will be about 131 trillion won for 2021, about a 25% decline from 2018 when Kospi hit a record, Lim said.
“How much the government's stimulus measures would lead to an effective rebound in economy” is a key factor, Lim said. “If we can't see earnings rebound, the upper range of Kospi will be limited.”
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