'Fear of Adjustment Speculation Prevails' Investor Sentiment Shrinks, Foreigners Not Returning... Will There Be a Rebound Before Close?

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] As fears of stock market corrections due to rising interest rates and inflation pressures grow, the market is showing mixed trends.

On the 23rd, the domestic stock market opened lower for both KOSPI and KOSDAQ. The KOSPI index started at 3,069.26, down 10.49 points (0.34%) from the previous day. The KOSDAQ index began at 952.23, down 2.06 points (0.22%). While rising interest rates have caused market volatility, the interest rate factor itself continues to drive increased volatility. The early session decline is intensifying. As of 9:24 a.m., the KOSPI's decline rate reached 1.17%, standing at 3,042.33. The KOSDAQ's decline rate was 1.71%, at 937.68.

Lee Kyung-min, a researcher at Daishin Securities, analyzed, "Rising interest rates can lead to valuation burdens and discounts on growth stocks, and declines may raise concerns about economic slowdown, so the interest rate factor itself may cause increased volatility for the time being."

At the start of trading, individuals who were predominantly selling switched back to buying. As of 9:24 a.m., they were net buyers of 89.2 billion KRW in the KOSPI market and 33.4 billion KRW in the KOSDAQ market. This shift to net buying is interpreted as anticipation of remarks from Federal Reserve Chairman Jerome Powell.

On the other hand, foreigners are net sellers in both markets, offloading about 150.6 billion KRW in the KOSPI market and 24.2 billion KRW in the KOSDAQ market. Institutions are net buyers of 68.5 billion KRW in the KOSPI market but net sellers of 600 million KRW in the KOSDAQ market.

Among the top 10 KOSPI stocks by market capitalization, all except 10th-ranked Celltrion are declining. Similarly, among the top 10 KOSDAQ stocks, all except 3rd-ranked Pearl Abyss and 5th-ranked Alteogen are falling. Most sector stocks are also down, with the exception of steel and metals, finance, insurance, and banking sectors, which are showing gains.

Kim Dae-jun, a researcher at Korea Investment & Securities, said, "The Federal Open Market Committee (FOMC) minutes confirmed the asset purchase stance but did not mention the timing of tapering, increasing the likelihood of a slowdown in the rise of U.S. interest rates. However, due to remaining expectations for economic stimulus from the Biden administration, the upward trend is expected to continue. Since U.S. interest rates influence domestic rates, we should be mindful of stock market sluggishness caused by a gradual rise in interest rates."

Labor-gil, a researcher at NH Investment & Securities, also noted, "Continued program selling mainly by institutional investors and simultaneous profit-taking by foreigners in both spot and futures markets are factors slowing the domestic stock market's rise," adding, "The global stock market is showing signs of overheating and may react sensitively to rising interest rates and inflation."

However, as time passes, a rebound buying influx is expected. If rebound buying occurs, the market may attempt a turnaround.

Seo Sang-young, a researcher at Kiwoom Securities, said, "The U.S. 10-year Treasury yield briefly rose close to 1.4% amid improved indicators and expectations for additional stimulus, but with anticipation of remarks from Fed Chair Powell on the evening of the 23rd, the possibility of continued deterioration in investor sentiment is limited. Since Powell is expected to maintain this stance during the Senate hearing, there is high expectation for rebound buying. Considering this, the Korean stock market is expected to show changes following the People's Bank of China's announcement after 10 a.m., and then seek a rebound ahead of Powell's remarks before market close."

Lee Sang-min, a researcher at KakaoPay Securities, emphasized, "The market's main concerns are interest rates and inflation, but we believe inflation will not damage the market, and the current rise in interest rates is a natural flow due to economic recovery. This is not an issue that would cause the Fed to shift to a tightening policy."

However, the fact that foreigners, who hold the key to the direction of the domestic stock market, have not returned remains a limiting factor for gains. Lee Jae-sun, a researcher at Hana Financial Investment, said, "While KOSPI earnings estimates have maintained a top-tier level among Asian countries alongside Taiwan since 2020, and the semiconductor sector, a representative industry of both countries, shows optimistic improvement, the relative strength of the Korean IT index compared to MSCI Taiwan IT has reverted to mid-2020 levels. Additionally, foreign capital inflow relative to Taiwan was relatively sluggish during the overheated market in January, which needs to be taken into account."

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