Stock price settled at 3,000, Bitcoin era of 40 million won
‘Bubble Indicator’ at the Buffett Index
Asset market polarization’warning’ on steep surge
As the KOSPI rose more than 300 points in a month, breaking the 3,000 line, and Bitcoin, which was 2 million won per piece in 2019, recently exceeded 40 million won, there are growing concerns that the asset market has bubbled.
The asset market is showing an overheating pattern against the background of the enormous liquidity released on the market, but the real economy that should support it is showing no sign of recovery due to the Corona 19 crisis.
Experts warn that the asset market could be the first to be shocked if the gap between the asset market and the real economy is prolonged, and market liquidity declines due to a sharp rebound after the coronavirus outbreak.
When I open my eyes, the record high… 3,000 shares settle
According to the Korea Exchange on the 7th, the KOSPI reached 3,031.68, up 2.14% from the previous day, and settled at the 3,000 line. Kospi, which had collapsed from the threshold of the 3,000 line the day before, opened a full-fledged ‘3,000 Era’ by showing off its potential to penetrate the 3,030 line thanks to the accompanying buying trend of institutions that bought more than 1 trillion won and foreigners (100 billion won) that day.
On this day, the price of bitcoin, the leader of virtual currency, also exceeded the 40 million won level for the first time in history. According to Bithumb, a virtual asset exchange, bitcoin was traded at the level of 41 million won on the afternoon of this day, a nearly 9% increase from the previous day. It is showing a steep rise, rising by 10 million won just 10 days after it surpassed 30 million won at the end of December last year.
The sharp rise in asset prices, which changes to an all-time high after opening their eyes, is largely due to the excessive liquidity caused by the government’s enormous fiscal investment and the mass of money lost in the era of’zero (0) interest rates’.
The amount and speed of funds actually flowing into the asset market are gradually increasing. On the 6th, the transaction value of the KOSPI and KOSDAQ market reached an all-time high of 47.4 trillion won. On the 7th, it also surpassed 44.76 trillion won, which is twice the average daily trading value last year.
The amount of investor deposits, ready to jump into the stock market at any time, surpassed 68 trillion won on the 6th and soared to the bottom of 70 trillion won. The credit loan balance, which is money borrowed by a securities company by individual investors for stock investment, also exceeded 20 trillion won (19,950 billion won as of the 6th).
On the afternoon of the 7th, when the KOSPI broke the 3000 line for the first time ever, in the lobby of the Korea Exchange in Yeouido, Yeongdeungpo-gu, Seoul. Congratulations applause. Joint coverage photo
Asset price rises “too fast”… a growing bubble warning theory
However, there are also concerns about bubbles (bubbles) over’asset inflation’, which is not supported by the real economy. The rise in asset prices is, of course, too steep. The’Buffett Index’, which is used as an indicator of actual stock market overheating, has already reached a record high.
This index, which divided the market capitalization of the KOSPI and KOSDAQ by the domestic nominal gross domestic product (GDP), recently rose to 123.4%. This index, which is judged to be’overvalued’ when it exceeds 100%, has increased 1.5 times in just two years.
The stock price-to-earnings ratio (PER), a representative indicator for determining the appropriate level of the stock price, is now 14x, far exceeding the average for the past five years (10x). It means that the current stock price is too expensive compared to the profits our company makes.
Hwang Seung-taek, head of Hana Financial Investment Research Center, said, “It is impossible to judge the current level as’overheating’ based on absolute standards, but it is a burden that the rate of increase is obviously fast.”
Lee Kyung-min, a researcher at Daishin Securities, said, “If the recovery of fundamentals (basic physical strength) fails to meet market expectations, the reaction of excessive optimism is inevitable. However, the side effects caused by excessive rise are bound to increase.”
There are also concerns that the polarization of income will become as severe as the gap between the real economy and the financial market.
Young-moo Cho, a researcher at the LG Economic Research Institute, said, “In a situation where money makes money, wealthy people will use loans to earn more assets, but those who have lost their jobs and lost their income and have even blocked their loan path will be gradually marginalized.” “It is highly likely that a vicious cycle will continue, as the polarization of Korea will lead to polarization of consumption and asset market again.”
The government also issued warnings aimed at the boiling asset prices. Kim Yong-beom, the first vice minister of the Ministry of Strategy and Finance, said at a macroeconomic and financial meeting that day, “If the recovery of Corona 19 becomes visible this year, there is a prospect that inflation due to the increase in global consumption may accelerate the adjustment of the US Federal Reserve (Fed) monetary policy.” “We need to pay close attention to the risk factors that may arise during the economic recovery process.”
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