'Weak Market Before Holidays' Institutional Selling Increasing Supply-Demand Instability... MSCI, Trump Impeachment, Option Expiry

Expect Focus on Policy and Economy After US Trump Issue Ends
Trading Quiet During Holiday Week... Supply and Demand Instability After Seollal Is a Concern

[Asia Economy Reporter Lee Seon-ae] The Lunar New Year holiday is coming next week. According to the securities industry on the 6th, the key events to watch before the holiday include the start of the impeachment trial of former President Donald Trump, the Morgan Stanley Capital International (MSCI) quarterly review, and the February options expiration date.

MSCI Quarterly Review (February 9)

The MSCI quarterly review, which occurs four times a year, is scheduled to be announced at 11 PM Central European Time (CET) on February 9, which corresponds to 7 AM Korean time on February 10. According to Ebest Investment & Securities, stocks likely to be included are Green Cross, Hanmi Science, SKC, HMM, and Big Hit, while stocks possibly excluded include Ottogi, Lotte Holdings, Samsung Card, Korea Gas Corporation, and Meritz Securities. Actual changes will take place at the close of trading on February 26.

Researcher Yeom Dong-chan of Ebest Investment & Securities explained, "Additionally, there is discussion about changing Lebanon from a frontier market to a standalone index, but there is currently no possibility of country changes in the Emerging Markets index that includes Korea."

Start of Trump Impeachment Trial (February 9)

The impeachment trial of former President Trump will officially begin on February 9. The Democratic Party claims that former President Trump incited the crowd and provoked a riot, while the defense argues that impeaching a former president is unconstitutional and that Trump's statements are protected under freedom of expression. Researcher Yeom stated, "For the impeachment to pass, two-thirds of the Senate, or 67 votes, are required. Given that Republicans currently hold 50 seats, it is unlikely that more than 17 Republicans will vote in favor, so the likelihood of impeachment passing is low. However, a separate vote to bar former President Trump from holding future public office is possible."

Researcher Kim Dae-jun of Korea Investment & Securities said, "Since it is highly unlikely that Republicans will support it, the actual possibility of impeachment is almost none. Separately, from a market perspective, removing the uncertainty surrounding Trump could have a positive effect, allowing the market to focus on the economy and policies moving forward."

February Options Expiration Date (February 10)

The last trading day before the holiday usually sees decreased trading volume, and this year, the last trading day on February 10 coincides with the options expiration date. In Korea, before long holidays like Seollal and Chuseok, stock prices tend to weaken 3 to 5 days prior as investors secure cash or avoid uncertainty. The overlap with the options expiration date could heighten concerns.

Researcher Yeom explained, "However, in the past, the last trading day before a holiday coinciding with the options expiration date occurred during the 2005 Seollal and 2019 Chuseok, and market volatility was not significant at those times. Therefore, contrary to concerns, it is expected that the market will not be shocked."

Researcher Kim said, "Typically, the week including a holiday sees light trading and low price volatility, and this year is expected to be similar. However, after Seollal, supply-demand instability may resurface in the market, causing the index to move sideways, with institutional selling pressure at the center of this."

Unusual Institutional Net Selling, Ultimately Foreigners

Looking at trading trends by investor type, institutional net selling is notable. Almost all entities, including financial investment firms, trust funds, private equity funds, and pension funds, are selling stocks. The problem is that this trend is unlikely to end soon. Each has different management strategies, and some, like trust funds or private equity funds, are exposed to redemption pressures and must sell stocks. However, individuals have been continuously absorbing this supply, so a significant drop in the index itself is not expected. Researcher Kim emphasized, "Ultimately, in this situation, the market direction will be determined by foreigners as in the past, so it is important to closely monitor foreign trading trends."

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