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So tell me, what is this KOSPI you speak of?

By Emerging Money,  June 22, 2012, 04:00:58 PM EDT

The KOSPI, or Korea Composite Stock Price Index is the primary index used to measure the 788 listed stocks on the Korea Exchange , or KRX of South Korea.

[caption id="attachment_64619" align="alignright" width="300" caption="Namdaemun market, Seoul, South Korea"] Image courtesy Emmanuel Dyan: http://www.everystockphoto.com/photographer.php?photographer_id=12988 [/caption]

The KOSPI is calculated in reference to the total market capitalization of all listed companies on January 4, 1980, while making adjustments for newly listed companies. The KRX also publishes a variety of sub-indices based on market capitalization and industry.

The KRX has a market capitalization of $995 billion (15th in the world) and a trading volume of over $1.5 trillion a year, making it one of the largest emerging market exchanges.

The 2011 World Federation of Exchanges report also found that the KRX is the largest exchange in the world, in terms of the number of stock index options and equity derivatives traded.

South Korea is currently the 12th largest economy in the world with a purchasing power (PPP) gross domestic product of more than $1.5 trillion, or $31,700 per capita. The wealth level, liquid markets, and globally recognized brands like Samsung, Hyundai, LG, and Kia have fueled some debate about whether South Korea should still be classified as an emerging market or whether it can 'graduate' to developed status.

However, the KOSPI index is still more correlated to other emerging markets (represented here by the MSCI Emerging Markets Index) than to developed-world benchmarks like the Standard & Poor's 500). That could be in part because giant Korean stocks like Samsung ( SSNLF , quote ) and Hyundai are among the largest components of the MSCI benchmark. This correlation, plus the higher volatility of the KOSPI when compared to developed market indices like the S&P 500, have led to South Korea remaining among emerging markets for now.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, International, Stocks

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