'Dollar-converted' KOSPI far from record high

17% lower than January 11, 2021

Not overvalued yet from foreign investors' perspective

The KOSPI index has reached an all-time high, but when converted into U.S. dollars it is still understood to be about 17% lower than the record high. This can be interpreted to mean that, from the standpoint of foreign investors, the listed securities market has not entered an overvalued range.

The dollar-converted KOSPI index was calculated at 1204.32 after the market close on the 19th. It is the KOSPI index in won terms adjusted by the won·dollar exchange rate (base rate). The higher the exchange rate on that day, the more the index is converted to be relatively lower than the KOSPI index.

The KOSPI reached an intraday record high of 3467.89 on the 19th, but the dollar-converted index is about 17% lower than the all-time high (1444.49) on January 11, 2021.

The difference is larger for the KOSDAQ. The KOSDAQ's dollar-converted index stood at just 526.49 on the 19th. Compared with the peak on March 10, 2000 (2205.55), set during the venture boom, it is at about one-quarter. The KOSDAQ index itself was also only 863.11 on the 19th, far below the March 10, 2000 record high (2925.20).

The reason the dollar-converted value lags far behind despite the index rally is the high exchange rate. In January 2021, when the KOSPI's dollar-converted index peaked, the won·dollar exchange rate was below 1100 won. From foreign investors' perspective, the current KOSPI could be seen as cheap. Just as export companies benefit from a high exchange-rate environment, this could be a point where additional capital inflows into the stock market can be expected.

So far this year, the dollar-converted index's rate of increase has been nearly 10% points higher than the KOSPI. While the KOSPI rose 44% from 2399.49 at the end of last year to 3445.24 on the 19th of this month, the dollar-converted index surged 53% from 787.84 to 1204.32. Recently the won exchange rate has approached 1400 won per dollar, but at the end of last year, when political uncertainty rose due to a state of emergency, it exceeded 1470 won, reaching the highest year-end level since the foreign exchange crisis.

Reporter Park Ju-yeon grumpy_cat@hankyung.com