South Korea’s economy shrugs off the pandemic

South Korean retail investors have declared war against short sellers, says Youkyung Lee on Bloomberg. The country this week ended the world’s longest pandemic-era ban on short-selling, which had been in place since March last year.

The ban helped the local Kospi index soar 27% last year, the strongest showing from any major world market. Retail investors have been piling in, with 95.5trn won (£62bn) in net buying since the ban was introduced.

Individual traders now make up more than three-quarters of the Kospi’s daily trading volume. Fearing that short sellers will now destroy their gains, coalitions of investors have said they will inflict a GameStop-style rout on short-sellers if the market takes a tumble.

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GDP rose by 1.6% in the first quarter to eclipse its level of late 2019, says Robert Carnell for ING Think. Growth for the year as a whole could now hit 4%. Strong global electronics demand has been a boon for the home of Samsung. The country is considered a bellwether for global trade. Exports have remained strong amid Chinese demand; US and European reopening should now deliver another boost. South Korea has done an excellent job of controlling the virus but its vaccine rollout has been very slow. The chaos in India is a reminder that sudden reversals of fortune are still possible during this pandemic.

Despite high incomes, the country remains classified as an emerging market. Indeed, Korean shares make up 13% of the MSCI EM index, more than India or Brazil.

On a cyclically adjusted price/earnings ratio of 18.1 the local market is at the cheaper end of global valuations. That partly reflects a “chaebol discount” – the country’s corporate giants have long been plagued by doubts about the quality of corporate governance.