After one-month losing streak, KOSPI recorded historic back-to-back rise from Monday to Wednesday, which amounts to 233.19 points (+15.82%) in total.
During the last month, until the first day of the historic rise began, KOSPI had dropped from 2243.59 points to 1457.64 points (-35.03%). KOSPI continued its rally after the three-day back-to-back rise and has recently bounced back to 1717.73 points (+17.84%) this Friday.
Observing the rapid bounce, the majority of individual investors, mostly new investors expecting resilience of the stock market as huge as the recent crash, assume that it would be the best time to buy stock at the lowest price as KOSPI has finally hit the substantial rock bottom and now is ready to enter bull market. There come up news articles every single day saying that the number of newly created brokerage accounts is rapidly increasing.
My opinion is, “It wouldn’t be a bad time to purchase some stocks and gradually accumulate them later until the current bearish phase finally ends, but it’s clearly not the time to bet all-in nor make leverages. Never in history could anyone exactly forecast where the lowest points are.”
All the financial policies, both monetary and fiscal, have been disclosed. However, even when the Fed announced “the unlimited QE,” NASDAQ futures rose about 500 points only for 30 minutes right after the announcement and then dropped by the same amount over the next three hours; the market reacted the same to the Wuhan coronavirus stimulus package, which amounts to $2 trillion.
In short, I cannot find any reason for the Korean stock market to rise this high nor this fast. My perspective that the recent crash is mostly out of sentiments than fundamentals is still valid, but we also need to be aware that there still exist innumerable surrounding risks both domestically and globally. Furthermore, as all the KOSPI and KOSDAQ stocks are still fairly cheap, even cheaper than in 2008, there would be no harm to wait just a little more before investing.
Especially if this is the first investment in your lifetime, I strongly recommend to start investing after this chaos of insane volatility disappears. It is reasonable for you to be concerned with the expected inflation as the government is planning to provide enormous amount of money to stimulate the economy, but it would be smarter not to lose the money in your pocket at first.
High return necessarily entails high risks. The stock market may go up in the long term, but nobody knows how long it will take to recover.
Buy the fear if you can stay calm in front of the turmoil, but step aside if you cannot.
Hence, here is my suggestion:
You first observe the market carefully at least for next few days. Instead of buying stocks right now, you’d better wait and keep your eyes on the market until all the fear and insanity from the Wuhan coronavirus, which are currently dominating the stock market, are resolved.
During then, takes some research on firms and industries you are interested in so that you can get the opportunity right at the moment it comes to you.
If what you want to do is simply to make a lot of fortunes in the midst of unpredictable chaos, you had better go to any nearest casino because playing blackjack might have higher odds than investing in stocks with that mind in the current market.
Believing all the stocks suggested a few days ago to have risen up satisfactorily enough over the recent bounce, I highly recommend liquidating at least the half of the position and hold cash for awhile unless you have already established a 5-year portfolio.