Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"

JAPAN FLOW Redux : Foreign Investor Flows (Still) Matter, and They Are (Still) Cyclical

JAPAN PASSIVE:  BOJ Tapering ETF Buys? Not So Fast

Thematic (Sector/Industry)

In this report, we analyze the seasonality of the Korean Stock Market using KOSPI index from 1998 to 2018. Our analysis suggests there is a clear seasonality in the Korean stock market. "Sell in May and Come Back in November" is the best strategy for KOSPI, according to our analysis. From 1998 to 2018, KOSPI was up on average 12.0% from November to April (6 months). For example, $1 million invested in KOSPI, generating a 12.0% per year (excluding taxes and transaction costs) using the seasonality strategy (buying KOSPI at the beginning of November and selling it at end of April) would have generated $10.8 million at the end of 21 years. In comparison, KOSPI was down on average 0.8% from May to October (6 months) from 1998 to 2018. How About This Year?  So far, "Sell in May and Come Back in November" strategy would have worked out well in Korea. For example, KOSPI was down 19.3% from end of April to end of October 2018. KOSPI is up 1.6% from end of October to December (as of 18th). Right now, the biggest impact to the direction of the global stock markets in the next several months will likely be determined in the last meeting of the US Federal Reserve on December 18th to 19th. A few high-profile investors such as <a href="https://finance.yahoo.com/news/paul-tudor-jones-says-fed-142323258.html" target="_blank">Paul Tudor Jones have recently mentioned that the US Fed will not raise interest rates in 2019. </a>A more dovish tone by US Fed Chairman Jerome Powell on the extent and pace of the future interest rate hikes in 2019 could set the tone for a turnaround of the global equity markets, including KOSPI, in the next few months.

In this report, we analyze the seasonality of the Korean Stock Market using KOSPI index from 1998 to 2018. Our analysis suggests there is a clear seasonality in the Korean stock market. "Sell in May and Come Back in November" is the best strategy for KOSPI, according to our analysis. From 1998 to 2018, KOSPI was up on average 12.0% from November to April (6 months). For example, $1 million invested in KOSPI, generating a 12.0% per year (excluding taxes and transaction costs) using the seasonality strategy (buying KOSPI at the beginning of November and selling it at end of April) would have generated $10.8 million at the end of 21 years. In comparison, KOSPI was down on average 0.8% from May to October (6 months) from 1998 to 2018. How About This Year?  So far, "Sell in May and Come Back in November" strategy would have worked out well in Korea. For example, KOSPI was down 19.3% from end of April to end of October 2018. KOSPI is up 1.6% from end of October to December (as of 18th). Right now, the biggest impact to the direction of the global stock markets in the next several months will likely be determined in the last meeting of the US Federal Reserve on December 18th to 19th. A few high-profile investors such as Paul Tudor Jones have recently mentioned that the US Fed will not raise interest rates in 2019. A more dovish tone by US Fed Chairman Jerome Powell on the extent and pace of the future interest rate hikes in 2019 could set the tone for a turnaround of the global equity markets, including KOSPI, in the next few months. 

Seasonality of the Korean Stock Market: "Sell in May and Come Back in November"