KOSPI ends year below 2400, worst in 16 years

Forex and stock markets closed on December 30 with their worst performance in 16 years following the global financial crisis. The Kospi ended the year below the 2400 mark, marking the sixth consecutive month of declines.


The won-dollar exchange rate hit its highest closing price in 15 years at over 1470 won per dollar.

The Kospi ended the day's trading at 2399.49, down 5.28 points, or 0.22 percent, from the previous session. It was down 2.3 percent from the end of the previous month, marking its sixth consecutive monthly decline in 16 years since 2008.

In the past 40 years, the KOSPI has only experienced three consecutive six-month declines (based on month-end closing prices): the 1997 Foreign exchange crisis, the Dot-com bubble burst in 2000, and the 2008 Financial crisis.

The won-dollar exchange rate ended the week at 1,472.5 won per dollar, up 5.0 won from the previous trading day, hitting a 15-year high on a weekly closing basis.

Earlier this year, Yoon attended the opening ceremony of the stock market for the first time as a sitting president, vowing to “eliminate the ‘Korea discount’ by bringing the market to the level of the global stock market.”


However, over the past year, the KOSPI has fallen 9.63percent and the KOSDAQ has dropped 21.7 percent, wiping out about KRW 255 trillion in market capitalization.

The yield gap between the U.S. and neighboring countries, such as Taiwan's Taiex (29.3 percent) and Japan's Nikkei 225 (19.4 percent), has widened by 30-50 percentage points. The exchange rate also rose by 14.3 percent (won’s depreciation), the largest drop among major currencies this year.

While the election of Donald Trump as US president and the deterioration of the semiconductor industry are cited as the main reasons for the decline, internal factors such as growing political uncertainty and a sluggish economy have also played a major role. In particular, investors withdrew from the market due to corporate governance improvement measures that are geared toward the eyes of companies instead of investors.

Foreigners, who bought about KRW 23 trillion in the first half of the year in anticipation of the 'value-up program,' sold about KRW 20 trillion in the second half of the year, contributing to the exchange rate appreciation. This contrasts with Japan's Nikkei 225, which closed at its highest level (39,968) in 35 years since 1989 as domestic and foreign investors responded to the valuation program.

“It's true that the stock price decline has highlighted the undervalued appeal of the KOSPI, but it's hard to see a sharp influx of bargain hunters,” said Kim Dae-joon, a researcher at Korea Investment & Securities, adding, “The rebound will take time as the macro environment and corporate earnings are not supportive.”

The immediate concern is that the Jeju Air passenger plane disaster will further depress already frozen domestic demand.

The Economic Sentiment Index (ESI), a measure of how businesses and households feel about the economy, fell month-on-month in the following months after the 2003 Daegu subway disaster, the 2014 Sewol ferry disaster, and the 2022 Itaewon disaster.

The prospect of the dollar strengthening further with the inauguration of Trump's second term next month is also weighing on the market.

The Bank of Korea’s Foreign Exchange Operations said in a report titled “Global Economic Conditions and Global Financial Market Outlook 2025,” “The U.S. dollar willstrengthen at the beginning of the year as expectations for the Trump administration's policies are high, but its effectiveness will be restricted due to the limitations in the policy implementation process, and the strength will be somewhat eased as other countries' interest rate cuts are expressed.



Kim Kyung-min

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