KOSPI 2700 Era in 'Samilcheonha' Crisis, "It Can Go Further"

Foreigners' Selling Spree Turns KOSPI Down... 2700 Level at Risk After 3 Days
Possibility of US Additional Stimulus Deal Increases... Year-End 'Santa Rally' Expectations Rise

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The KOSPI is facing the risk of falling below 2700 just three days after surpassing 2700 for the first time in history. It turned downward after six trading days due to foreign investors' selling pressure. However, this is seen as a brief pause before further growth, according to forecasts.

According to the Korea Exchange on the 9th, the KOSPI closed at 2700.93, down 1.62% (44.51 points) from the previous trading day. After a slightly weak start, the decline continued steadily, ending at the day's lowest point. It barely held the 2700 level, which it first entered on the 4th.

The decline was attributed to foreign investors' selling. On that day, foreigners net sold 852.2 billion KRW in the KOSPI market. This halted a four-day streak of net buying that followed a net sale of 2.4278 trillion KRW in November. Foreign investors sold all of the top 10 KOSPI stocks by market capitalization except Samsung SDI and Kia Motors. Leading stocks such as Samsung Electronics, SK Hynix, and Samsung Biologics, which had been continuously bought, turned to net selling that day. Institutions also sold 271.5 billion KRW. Although individuals net bought 1.1252 trillion KRW, it was insufficient to reverse the downward trend.

The won-dollar exchange rate, which had been a factor attracting foreign funds into the domestic market, also stalled. On that day, the won-dollar rate closed at 1085.4 won, up 3.3 won from the previous trading day in the Seoul foreign exchange market. This marked the first increase in six trading days. The risk appetite in the market declined as optimism over the U.S. government's economic stimulus package and COVID-19 vaccine rollout, which had been positive factors last week, faded.

Future outlooks are mixed. Global investment bank JP Morgan viewed the recent correction as a pause. It forecasted that the KOSPI would reach 3200 next year. This is a more optimistic outlook than Goldman Sachs' prediction last month that the KOSPI would reach 2800 by the end of next year. It is also higher than the highest domestic securities firm forecast of 3080 by Daishin Securities. This implies an approximately 18% increase from the previous day.

This is based on the expectation that various industries in South Korea will show balanced recovery next year. Strengthened corporate shareholder return policies and the establishment of an environment, social, and governance (ESG) culture are expected to improve the 'Korea discount.' In particular, the current government's housing market regulations are analyzed to continue channeling funds into the stock market. Additionally, consecutive initial public offerings (IPOs), excellent COVID-19 control, and the popularity of K-pop content are seen as major factors driving the rise.

Researcher Namjoong Moon of Daishin Securities expects a 'Santa rally' in the stock market at the end of this year. This is due to the acceleration of the transition of power to U.S. President-elect Joe Biden and growing expectations for the year-end shopping season, contrary to concerns. Furthermore, if the U.S. Congress agrees on a fifth economic stimulus package, the market could rise even more. Moon explained, "The next Biden administration's priority will be overcoming the COVID-19 crisis, focusing on fiscal policy such as emergency COVID-19 budgets and the fifth stimulus package rather than monetary policy to maximize policy effects. The gap between the parties in Congress over the size of the next stimulus package is narrowing, and with the slowdown in the filibuster, an environment for bipartisan cooperation is being created."

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