Share Prices Tell Future Trends

By Sohn Bok-jo, President of Daewoo Securities Co.

In general, people get nervous due to the loss of self confidence as they grow old and try either to reduce spending or heighten the attention on management of their assets. They care for things that make money, especially. When they decide to manage their assets, the possibility for success is very low due to the lack of fundamental knowledge and experience. Then what is the solution? I dare say that the answer is to get acquainted with securities firms or familiarize themselves with share prices.
All investments are made for their future returns. Real estates with high development value would see their prices jump. Interest rates rise if the economy is running well and the value of money increases. Share prices are the same. If the economy looks good, share prices will rise. If a company develops a new technology and it has good prospects, then the price of its stock will jump.
Among all investment sectors, the stock market relies on future chances. The stock market is a barometer of future performance of the economy because it moves by the consensus of many investors. For example, the share prices of domestic firms, which have been in the doldrums last year, rose sharply, which shows that investors knew that the domestic economy would improve and they put their money down on shares of domestic firms. About a year later, the general public realizes that the domestic economy began to recover, indicating that the stock market is a good forecaster for economic trends.
Investors decide where to put their money down, depending on their tastes and preference. But the stock market can tell the movements of the exchange rates, the price of raw materials, interest rates, and the real estate market. The success rate of asset management goes higher when an investment is made based on a study of the stock market, especially, the movement of share prices.
Many investors hold prejudiced views on the stock market if their countries have short histories of the bourses. Korea is one of those countries. They regard share prices are a supportive economic indicator, speculative and irrational in nature, avoiding it as an objective for long-term investments. It is not only individual investors, but also financial institutions, who are so called financial experts, who hold similar views.
For these reasons, the stock market in Korea has long suffered, shut out from investors with deep pockets. Many listed companies paid higher dividends than bank interest rates, but they have been ignored and share prices of first-rate companies in the world fell and stayed there. But the situation began to change with the fall of bank interest rates without many places to put money and depositors had to scramble to find new income sources. Interest in the stock market began to rise, changing the views on Korean companies. Share prices have been rising steadily in the past three years, but the expectations for another spurt also remain high.
Asset management has been becoming difficult because of a number of reasons, including the low rate of economic growth, and there are not many openings to break out of the doldrums. On the other hand, the concern for asset management has been expanding as the aging population increases, while the expectations for high profit rates have been lowered. The know-how for asset management has not been working, an indication that only way to manage assets is doing it steadily with a positive manner.
In the past, investors put their money in bonds and real estate and hoped for the best. But globalization eliminated national borders, making the value of assets fluctuate with those of assets in foreign countries. The real estate market is no longer a profitable one due to adequate housing supply in the capital area and various restrictions designed to cool down the market, including the August 31 measure put in force by the government.
Investors would now have to weigh various factors before making decisions on where to make investments including business trends, interest rates, and stock prices for bigger returns. In order to draw up a comprehensive investment plan, investors need outside help, along with their efforts. They would be able to learn growth sectors from the movement of stock prices. They would be able to enjoy a bigger return from investment, when they make investment decisions based on the movement of stock prices be they in stocks or in other areas. Business operators would be able to learn when to secure funds and invest through the movement of the stock market. It would be good for the spirit as investors grapple with stock market trends and agonize over where to make investments.
Investors need expert advice when they receive outside help. Currently, securities firms are the only place where investors could go to obtain comprehensive advice on the economy, the financial market and asset management. Securities firms have been in competition with foreign investors, unlike other financial institutions since the foreign exchange crisis. They have been handling the sale of stocks, derivative goods, funds and insurance products, practically all financial products. Not only that, they have been leading the effort to develop new advanced financial products. It is my judgment that investors would get very much help in running their assets from securities firms, which have been in constant touch with overseas economic trends through their vast research apparatuses, and familiarize themselves with stock prices. nw

President Sohn Bok-jo of Daewoo Securities Co.