[Weekly Market Review] Kospi Searching for Correction Opportunity at 2200 Level, Plummets on Second Pandemic Concerns

[Asia Economy Reporter Oh Ju-yeon] As concerns grow that the speed of economic recovery will be delayed due to the second pandemic of the novel coronavirus infection (COVID-19), the domestic stock market plunged sharply. After the COVID-19 crash, the KOSPI, which had sharply risen to the 2200 level during the rebound, fell to the 2080 level during trading in the second week of June (8-12), dropping 133 points over the week due to a rapid decline in investor sentiment.

Source=Korea Exchange

According to the Korea Exchange on the 13th, the KOSPI closed down 2.04% from the previous day at 2132.30 on the 12th. On Monday the 8th, it rose intraday to 2217.21, showing an unstoppable rebound, but since then, concerns over the sharply rising market increased, causing fluctuations around the 2200 level. Meanwhile, as COVID-19 cases continued to rise and forecasts suggested a delay in economic recovery, the U.S. stock market plunged, dragging down the domestic market as well.

On the 11th (local time), the three major U.S. stock indices closed down by 5-6%. The S&P 500 fell by 5.9%, the Dow Jones Industrial Average by 6.9%, and the Nasdaq by 5.3%. By sector, economically sensitive industries such as airlines and travel-related sectors plunged more than 10%. This sharp decline is analyzed to have been triggered by concerns over the resurgence of COVID-19 and the negative economic outlook from the U.S. Federal Reserve (Fed), serving as a catalyst for short-term market correction.

Kim Hwan, a researcher at NH Investment & Securities, said, "On the 10th, the Fed announced at the June Federal Open Market Committee (FOMC) meeting that it would maintain near-zero interest rates through 2022, mentioning a slow economic recovery." He added, "Especially, the current unemployment rate of 13.3% is expected to fall to 9.3% by the end of this year and 6.5% by the end of next year. The surprise in May’s employment data had raised expectations for a rapid recovery, but the Fed’s conservative economic outlook worsened investor sentiment."

The resurgence of COVID-19 in some U.S. regions that had resumed economic activities also added to the burden.

The total number of COVID-19 cases in the U.S. exceeded 2 million, with a high possibility of a second wave of infections in economically large regions such as Texas, Arizona, Florida, and California. However, Treasury Secretary Mnuchin stated that it would be difficult to reimpose economic lockdowns.

Researcher Kim said, "In the short term, concerns over the second pandemic may limit the upside of stock prices," but added, "Considering additional economic stimulus measures by policymakers ahead of the November presidential election and the Fed’s maintenance of a low-interest-rate policy, the possibility of a further large-scale correction in the U.S. stock market is low."

Short-term adjustments are also expected to be inevitable in the domestic stock market.

Although there were expectations for the return of foreign investors, it is interpreted as premature. In the KOSPI market, foreigners sold stocks worth 199 billion KRW from June 1 to 12. The selling pressure from foreigners was even greater when limited to last week.

From the 8th to the 12th, foreigners’ net sales reached 442.5 billion KRW. Institutions also sold stocks worth 2.0278 trillion KRW during this period.

However, individuals defended the index decline by net buying stocks worth 2.4533 trillion KRW. The top two stocks net bought by individuals last week were Samsung Electronics and SK Hynix, increasing holdings mainly in large semiconductor stocks again. SK Telecom, Hotel Shilla, and Hana Financial Group were also included. On the other hand, Kakao and NAVER were sold for profit-taking, appearing on the list of top net sales.

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