Foreigners and Institutions Increase Selling Amid US Interest Rate Hike... "Temporary Breather Phase"

US 10-Year Treasury Yield Rises to 1.3%
Concern More on Speed of Increase Than Rate Itself... Rally Faces Brake
"Domestic Stock Market Also Falters... Foreign Demand Expected to Improve After Pause"

On the morning of the 17th, when the KOSPI started weak, dealers were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul.
[Photo by Yonhap News]

[Asia Economy Reporter Minwoo Lee] The KOSPI index fell more than 1% due to simultaneous selling pressure from foreigners and institutional investors. The rise in U.S. Treasury yields appears to have caused a slowdown in the stock market, which has now spread to the domestic market. Since the attractiveness of emerging market stocks themselves has not been damaged, this is seen as a temporary pause for breath.

As of 10:13 a.m. on the 17th, the KOSPI recorded 3,118.78, down 1.41% from the previous day. After starting slightly lower at 3,162.95, down 0.01% from the previous day, the decline has been widening.

The selling pressure from foreigners and institutions is interpreted as the main driver of the index's decline. Foreigners and institutions sold a net 194 billion KRW and 787.2 billion KRW respectively, while individuals bought nearly 1 trillion KRW (978.1 billion KRW) to absorb the volume.

Sangyoung Seo, a researcher at Kiwoom Securities, said, "It is necessary to pay attention to the direction of foreign selling rather than the scale." He added, "As foreign futures selling spreads, program selling led by institutional investors is emerging. If foreigners increase futures selling rather than spot selling, more selling from institutional investors will follow."

Most sectors are in decline. The transportation equipment sector saw the largest drop at -2.00%. This was followed by machinery (-1.97%), electrical and electronics (-1.82%), pharmaceuticals (-1.66%), and manufacturing (-1.51%). Paper and wood (5.28%) and electric and gas utilities (1.67%) rose.

The KOSDAQ, which started slightly higher, showed a somewhat subdued performance. At the same time, it recorded 973.56, down 0.43% from the previous day.

In the KOSDAQ market, foreigners and institutions also continued their selling. Foreigners sold a net 79 billion KRW, and institutions sold 57.3 billion KRW. Individuals purchased 157.5 billion KRW.

More sectors declined. Digital content (-1.24%), pharmaceuticals (-1.19%), semiconductors (-0.93%), and other services (-0.81%) were among the losers. Telecommunications services (4.34%), internet (3.95%), and information devices (3.52%) rose.

It is analyzed that the rise in U.S. Treasury yields and the mixed performance of the U.S. stock market influenced the domestic market. On the 16th (local time), the U.S. 10-year Treasury yield rose more than 10 basis points (bp, 1bp=0.01%) to 1.317%, the highest level since February last year. It had been below 1% until the end of last year but has risen more than 30bp this year. As a result, while the Dow Jones Industrial Average rose only 0.20% compared to the previous trading day, the S&P 500 and Nasdaq closed down 0.6% and 0.34%, respectively, after a rally to new highs.

Yujun Choi, a researcher at Shinhan Financial Investment, explained, "The U.S. stock market reflected the rate hike all at once after reopening following the holiday. Although the absolute level of interest rates is not burdensome, the rapid rise caused the market to give back some of its gains."

However, he analyzed that the economic recovery is still ongoing and the attractiveness of emerging markets has not diminished. The decline in both the U.S. and domestic stock markets is seen as a temporary pause. Choi said, "The rise in interest rates is partly due to increased bond supply, but it seems that expectations for economic recovery played a bigger role. Once this pause passes, foreign demand is expected to improve."

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