[Weekly Market Review] Kospi Fails to Regain 2000 Level Amid US-China Trade Friction

[Asia Economy Reporter Minji Lee] From the 18th to the 22nd of last week, the domestic stock market touched the 2000 mark intraday for the first time in two and a half months. The increase in foreign investors entering the domestic stock market was largely influenced by rising expectations for additional US stimulus packages and economic reopening. However, concerns over potential trade frictions between the US and China caused the market to drop about 1.5% in a single day on the 22nd.

[Image source=Yonhap News]

According to the Korea Exchange on the 23rd, the KOSPI closed at 1970.13, up 2.2% from the closing price of 1927.28 on the 15th. During this period, institutional investors purchased stocks worth 138.5 billion KRW. Conversely, individual and foreign investors sold stocks worth 112.1 billion KRW and 46.9 billion KRW, respectively.

Recently, US Federal Reserve Chair Jerome Powell actively hinted at additional responses to the COVID-19 situation, and Treasury Secretary Steven Mnuchin mentioned the end of shutdowns and the full-scale reopening of the economy to aid recovery. As a result, the index surpassed the 2000 mark intraday on the 21st for the first time since March 6 (2040.22), two and a half months ago.

However, on the 22nd, concerns over US-China trade disputes intensified, causing the index to fall back to 1970.13. The impact of China’s decision not to set a GDP growth target at the Two Sessions weakened policy expectations significantly. On that day alone, foreign and institutional investors sold stocks worth 474.9 billion KRW and 448.5 billion KRW, respectively. Only individual investors bought stocks worth 936.2 billion KRW.

The US Department of Commerce plans to regulate Huawei’s purchase of US-made software and semiconductors through amendments to strategic goods export regulations. The Nasdaq intends to strengthen IPO requirements to a minimum of $25 million or at least one-quarter of market capitalization, which is expected to limit Chinese companies’ listings. Hyoyul Heo, a researcher at NH Investment & Securities, stated, “The US Senate passed a bill allowing the delisting of Chinese companies if they do not comply with US accounting standards,” and predicted, “US sanctions on China will increase the likelihood of US-China frictions.”

During the week, stocks in sectors affected by COVID-19 surged sharply. In particular, airline-related stocks, which had fallen significantly due to the pandemic, showed notable gains. Jeju Air rose about 17% over the week, while Korean Air (7%), T’way Air (6%), and Asiana Airlines (1%) also increased.

Junho Byun, a researcher at Heungkuk Securities, said, “There are signs of portfolio shifts from stocks benefiting from COVID-19 risks to sensitive stocks, value stocks, and defensive stocks that had been suppressed,” adding, “With market surges fueled by expectations for the Moderna vaccine, the prices of previously suppressed affected stocks rose sharply.”

This content was produced with the assistance of AI translation services.