A quick introduction to Korean Stock Market

Mingi Woo

First, we must look at the two main composite indexes in Korea. While the United States has three indexes (S&P 500, Dow Jones Industrial Average, and Nasdaq), Korea has two main indexes (KOSPI, KOSDAQ). KOSPI measures the performance of large/well-established businesses, while KOSDAQ measures small to medium-sized businesses.

How is the composite stock index of the KOSPI index calculated?

The composite stock index is calculated for all listed stocks on the Korean stock exchange. The stock market is represented by the KOSPI (Korea Stock Price Index), and the KOSDAQ market is represented by the KOSDAQ index. Most of Korea’s representative companies are listed on the stock market, so when someone refers to a comprehensive stock index, you can think of it as referring to the KOSPI. The composite stock index is calculated by taking January 4, 1980, as the standard point in time, setting the market capitalization at the standard point of time as 100, and calculating what the market capitalization is at the point of comparison and divide them together. If the KOSPI index is 2,000 (2000/100) as of June 2016, the index has risen 20 times over 36 years.

KOSPI200 index

Like the S&P 500, KOSPI 200 index selects the top 200 stocks among stocks listed on the KOSPI market in consideration of market representativeness, industry representativeness, and liquidity (degree of trading volume). The starting market capitalization was set as 100. The market capitalization of the 200 stocks accounts for about 85% of the total market capitalization, which moves with the same patterns as KOSPI. Currently, derivatives based on stock indexes, such as stock index futures and stock index options are based on the KOSPI 200 index.

More Information on KOSDAQ

About the KOSDAQ Index, The KOSDAQ Index started with an index of 1,000 in October 1997 by calculating the market capitalization of all stocks listed on the KOSDAQ similar in calculated to the KOSPI. In early 2000, the KOSDAQ index continued to rise due to the venture business craze, exceeding 2,800 points at one time, but then fell to 250 points and recently recovered back to 600-900 points.

KRX100 and KRX300

KRX100 is an index created by selecting 100 representative blue-chip stocks with liquidity across the KOSPI and KOSDAQ markets. The KRX100 set the market capitalization at the beginning of January 2001 as 1,000 and has been in use since June 2005. It has significance as it represents the Korean stock market, and constituent stocks are regularly adjusted on the second week of Friday in June. The same thing applies to KRX300.

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