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2017-10-31 17:17
Stocks closed at a new all-time high Monday, with the benchmark Korea Stock Price Index (KOSPI) surpassing the 2,500-point mark for the first time.

It has taken the main bourse about 10 years and three months to hit another landmark since the index reached the 2,000-point threshold, July 24, 2007. Market analysts predict the KOSPI could reach 2,600 by the end of this year, and touch 3,000 in the medium to long run.

Especially encouraging is that the ongoing bullish market comes amid various adverse factors, including North Korean security threats, China’s economic retaliation against Seoul’s deployment of a U.S. anti-missile battery, and rising trade protectionism in America. All this may reflect investor confidence in the resilience of the Korean economy.

A global economic recovery and energetic performances of domestic businesses seem to have more than offset gloomy political news.

A deeper glimpse into the unprecedented market vigor reveals shady sides of the economy, however. Above all, government and business officials should take extra care not to be misled by the “optical illusion” resulting from a super-boom” in the semiconductor industry. For example, the operating profit of 650 listed companies totaled 78 trillion won ($69.3 billion) in the first half, up 18 percent from a year ago. Exclude the earnings of the two largest chipmakers _ Samsung Electronics and SK Hynix _ and the total falls by 2 trillion won year-on-year.

Particularly worrisome is the rapid sales drop of carmakers and shipbuilders, two industries that induce industrial production in various related sectors. Their capacity utilization rates in the second quarter were the lowest since the first quarter of 2009 in the aftermath of the global financial crisis.

To open the “KOSPI-3,000 era,” policymakers should broaden the bourse’s base and strengthen economic fundamentals, supplementing the stock market’s operation. Among significant steps that can invigorate the bourse further are expanding investment in ventures and small- and medium-sized enterprises, relaxing the requirements for an initial public offering and revitalizing the private equity market.

At stake is how to find new growth engines that can feed the economy after the semiconductor boom is over. Bureaucrats must loosen their administrative reins so more global players can appear, taking the lead in Korea’s transit to the Fourth Industrial Revolution.

 

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