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113% of market capitalization relative to GDP … “Gap with the economy” vs. “It is only a reference indicator”
(Seoul = Yonhap News) Journalist Han Jong-chan = KOSPI broke the record for two consecutive days on the 27th. On this day, KOSPI closed the deal at 2,633.45, up 7.54 points (0, 29%) compared to the previous day. The highest closing price recorded the previous day (2,625.91) was rewritten in one day. However, it did not exceed the intraday high (2,642.26) recorded on the 25th. The photo is a sales room at the Hana Bank headquarters in Jung-gu, Seoul, this afternoon. 2020.11.27 [email protected]
(Seoul = Yonhap News) Reporter Ji-Heon Lee = The ‘Buffett Index’, an overvaluation indicator of the stock market, was found to have risen to the highest level in history as the KOSPI rose to 2,630 units, beating a record.
According to statistics from the Bank of Korea and the Korea Exchange on the 30th, the ratio of the total market capitalization of all listed companies in Korea (combined stock market and KOSDAQ market) was 112.7%, the highest in history. , compared to the nominal gross domestic product (GDP) of 27.
This is a ratio calculated by applying national income data for the four quarters (Q3 2019 to Q2 2020) just prior to the release of the current statistics and it is estimated that the actual market capitalization ratio to annual national income this year is higher than this.
This is because the nominal national income is expected to decrease in the second half of this year compared to the same period last year in the aftermath of the new coronavirus infection (Corona 19).
The highest of the previous bull markets was 106.4% (based on 2018 GDP) on January 29, 2018, when the KOSPI hit its previous high.
The ratio of market capitalization to GDP is often used as one of the indicators for determining whether the stock market is overvalued or undervalued relative to the historical average.
Warren Buffett, president of Berkshire Hathaway, is known to use it as a favorite and is commonly used as the Buffett Index. When Buffett judges the US stock market, if the index is below 80%, it is undervalued, and if it is above 100%, it is considered overvalued.
In the share prices it is estimated that the current market capitalization ratio to GDP is burdensome compared to the past trend.
Ahn So-eun, researcher at IBK Investment & Securities, said: “The part where the ratio of market capitalization to GDP deviates from the long-term trend reflects the magnitude of the gap between the underlying (fundamental) conditions and the stock price”. “Here, the commercialization expectation of the vaccine that has not yet been reflected in GDP. It will include expectations for the administration, large-scale policies like the Korean version of the New Deal, and expectations for an economic recovery.”
He added: “If market expectations are not realized, it may be difficult to accept that the share price is at a reasonable level.”
On the other hand, the Buffett Index is believed to be just one of several benchmark indicators for evaluating the stock market, and you don’t need to give too much meaning right now.
Samsung Securities[016360] The researcher said: “In the case of other equity markets like the US, the Buffett Index is much higher, so we don’t think we need to apply too rigid standards to the national stock market.”
According to Business Insider, the US Buffett Index, calculated using the Wilshire 5000 Index, is around 170% earlier this month.
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2020/11/30 07:10 sent
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