Stock Markets in the US and South Korea

It is known that one of the most crucial components of economic activity flow and community spirit is the cost of stocks. Emerging stock markets contribute greatly to the development of the economy itself. It is stated that, on the global scale, it is the stock market that determinates the economic power and growth of a country taken individually (Singh 242). The following paper overviews two stock markets: New York Stock Exchange (NYSE) and Korea Composite Stock Price Index (KOSPI). These two stock exchange markets fall under scrutiny from the perspectives of total market capitalization, existing liquidity programs, and their relation to the US and the Korean banking sectors respectively.

KOSPI’s head office is in Seoul. It consists of more than seven hundred components, among which are Samsung Electronics, Hyundai Motor, and other worldwide-known companies. However, if the size of the countries on the world map were defined by their total market capitalization, the United States would be sixteen times the size of South Korea (Goldstein par. 1-6). Indeed, the New York Stock Exchange, headquartered in Wall Street, Manhattan, is by now the most powerful stock exchange in the world. It consists of more than three thousand organizations such as Advantage Oil & Gas Limited, Duke Energy Corporation, ant others. According to Focus journal, in October 2015 total capitalization of the NYSE amounted to more than $18.3 trillion while that of Korea Exchange (which is the previous name of KOSPI) was only $1.18 trillion (“Equity – Market Capitalization”). These figures reflect the value of both markets at the given period of time. They consist of shares of domestic and foreign organizations, investment funds, etc.

New York Stock Exchange liquidity programs are investor-oriented. They are aimed at improving prices for individuals to support the conveyance of retail orders. These programs opt for the investors’ good and for the market’s better competitive characteristics (“Liquidity Programs” par. 2). At the same time, KOSPI applies a different kind of policy. It appears that its investors only go into funding stocks because of their utmost disappointment with the Central Bank’s interest rates. In March, they were cut down to the historically lowest percentage of 1,75. The most profitable are the stocks of Samsung Electronics, LG H&H, and Hyundai Development (Ren par. 3-9). Thus, while the US major stock market acts for the sake of the investors’ good, the Korean one practically leaves them no choice but to purchase their stock.

Banking sector and stock exchange are deeply interconnected. It is stated that the banking sector is an indicator of a country’s economic power. At the same time, if the banking sector is strong, so are the markets. Indeed, when share costs are on the rise, it is seen as a result of growing investment, and the investment increase is correlated with that of the costs. The changes in the share costs influence individuals’ income level and how much hey consume. This is the reason banks tend to track the functioning of the stock markets. What they try to do is ensure financial stability (Nier 4-7). KOSPI plays a significant role in the banking sector as it has drawn the Industrial Bank of Korea, Woori Bank and others as its partners. As to the NYSE, there are a number of banks acting as its stakeholders. Among them are the Bank of New York Mellon Corporation (also known as BNY Mellon) and the Bank of America Corporation (BAC). The 2008 Financial Crisis that put the global economy on the edge of collapse proved the power that the Wall Street had. Of course, the expansion of liquidity of the Central Bank and the fact that the banking sector invested money into emerging markets nearly ruined the economy. Still, in South Korea, such serious crisis proved a disaster for exports, slowing own the domestic economy to a minimum. Korean banks appeared to be solid; however, during the crisis, the slow-speed deposit increase seriously jagged their liquidities. (“Global Financial Crisis Hits South Korea” par. 2-15). This is to prove that despite considerable influence in the banking sector, Korean economy experienced more serious difficulties that exacerbated its stature as the world’s economic power.

To sum it up, the ways the Korean and the US stock markets are functioning show great diversity. Firstly, the total market capitalization of the New York Stock Exchange is sixteen times as much as that of the Korea Composite Stock Price Index. In addition, the number of the NYSE’s components is more than four times as big as the KOSPI’s. Furthermore, the liquidity policies of the NYSE seek to comfort the investors with lower prices and other facilities. On the other hand, South Korea shows less logic in that, literally forcing the investment of their stock. Besides, it appears that, among the Korean banks, the KOSPI is practically as influential as the NYSE. However, the lessons from the 2008 crisis showed that the KOSPI’s status on both the local and global scale is significantly less stable than that of the Wall Street.

References

“Equity – Market Capitalization.” Focus. World Federation of Exchanges Members, 2015. Web.

“Global Financial Crisis Hits South Korea.” Forbes. Forbes.com LLC, 2008. Web.

Goldstein, Steve. “Here’s The Map of the World, if Size Were Determined by Market Cap.” MarketWatch. MarketWatch, Inc., 2015. Web.

“Liquidity Programs.” NYSE. Intercontinental Exchange, Inc., 2015. Web.

Nier, Erlend Walter. “Financial Stability Frameworks and the Role of Central Banks: Lessons from the Crisis.” International Monetary Fund. International Monetary Fund, 2009. Web.

Ren, Shuli. “Korea’s Liquidity-Fueled Rally to Continue.” Barron’s Asia. Dow Jones & Company, Inc., 2015. Web.

Singh, Mahipal. Security Analysis with Investment and Portfolio Management. New Delhi, India: Gyan Publishing House, 2011. Print.