Korea Stock Market Valuations and Expected Future Returns

Updated at Mon, 25 Mar 2019 20:30:06 -0500
Country: Korea (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 140%; Minimum - 36%; current - 74%
Expected future annual return: 8.8%

ETF Used for dividend yield: EWY (Yield=3.36%)
Market Index used: KOSPI
Current Annual GDP: $1,571 billion US dollars or 1,770,990 in billions of national currency (GDP in Local Current Prices Annual Growth=4.29%)
Data since year 1997


Korea Historical GDP Growth

Historical GDP of Korea in billions of national currency. The GDP in local current prices has grown at the annual rate of 4.29% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $1,571 billion US dollars or 1,770,990 in billions of national currency.

Korea GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Korea in billions of national currency. This value is normalized using the data published by WorldBank. KOSPI is used for the normalization. This is the index of all common stocks traded on the Stock Market Division of the Korea Exchange.

Korea Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Korea is 74%. The historical high was 140%; the historical low was 36%. If we assume that the ratio will reverse to the historical mean of 82% over the next 8 years, the contribution to expected annual return is 1.16%. This is the detailed historical chart of the ratio.

Korea Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Korea stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 82% over the next eight years.

The blue line indicates the actual, annualized return of the Korea stock market over eight years. We use “KOSPI” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Korea

Conclusion

The stock market of Korea is expected to return 8.8% a year for the coming years. This is from the contribution of economic growth in local current prices: 4.29%, Dividend Yield: 3.36% and valuation reverse to the mean 1.16%.

This is the projected return of the stock market in Korea relative to other countries. Click on each bar in the chart to go to other countries:


You can go here to see what international stocks Gurus are buying.

Add Notes, Comments

If you want to ask a question or report a bug, please create a support ticket.


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK