KOSPI 'FOMC Watch Game'... Cyclical Stocks Rise

KOSPI Mixed... Closes Lower
Construction and Other Cyclical Stocks Stand Out with Gains
Focus on Policy Direction at FOMC

Photo by Getty Images Bank

[Asia Economy Reporter Junho Hwang] On the 15th, the KOSPI closed mixed. The index fluctuated as individual investors' net buying was offset by net selling from institutions and foreigners. Concerns over rising market interest rates weighed on the stock market, but expectations from the implementation of the U.S. economic stimulus package and the recovery of cyclical stocks stood out.

KOSPI Mixed... Only Cyclical Stocks Rose

On that day, the KOSPI showed mixed trends from the start of trading and closed down 8.68 points at 3,045.71, a 0.28% decrease from the previous closing price. The KOSPI rose to a high of 3,065.17 before falling to 3,026.14, repeatedly fluctuating.

Individual investors led the index upward with net purchases of 469.6 billion KRW. However, institutions and foreigners sold net amounts of 302.8 billion KRW and 171.2 billion KRW respectively, resulting in a decline at the close.

The number of advancing stocks was 561, exceeding the 293 declining stocks. However, the electrical and electronics sector, including Samsung Electronics, showed a downward trend, dragging the index down. Samsung Electronics accounts for about 26% of the total KOSPI market capitalization. Samsung Electronics closed down 1.21% at 81,800 KRW that day.

By sector, the rise in cyclical stocks was notable. As COVID-19 vaccine distribution accelerated, signs of economic recovery became more apparent, linking interest in cyclical stocks to stock price increases.

The construction industry showed a rise of over 2% that day. Despite the possibility of Land, Infrastructure and Transport Minister Byeon Chang-heum's resignation, expectations for private-led redevelopment and reconstruction grew, boosting related stocks. Daewoo Engineering & Construction and HDC Hyundai Development Company were among the major gainers.

The transportation equipment sector, including automobile and shipbuilding stocks, also showed strength. Hyundai Heavy Industries rose on news of an 823 billion KRW order. Kia Motors increased following strong domestic automobile export performance in February. In the food and beverage sector, related stocks rose on expectations of Market Kurly's U.S. stock market listing.

Among the top market capitalization stocks, LG Chem maintained a rise of over 2%. News that the share of prismatic batteries among electric vehicle batteries (secondary batteries) fell below 50%, while the share of pouch-type batteries expanded significantly, highlighted LG Chem. LG Chem and SK Innovation are major suppliers of pouch-type secondary batteries in North America and Europe.

KOSDAQ Closed Higher

Unlike the KOSPI's decline, the KOSDAQ closed higher. It rose 1.40 points to close at 926.89, up 0.15% from the previous session. Individual investors recorded net purchases of 107 billion KRW, pushing the index above the 920 level, but foreigners and institutions sold 76.1 billion KRW and 23.8 billion KRW respectively, limiting the gains.

By sector, construction and insurance showed strength, while distribution and semiconductors weakened. On the KOSDAQ, 724 stocks advanced, while 572 declined.

Among the top market capitalization stocks, Alteogen's rise stood out. The stock was driven by news of strengthening patent barriers for the human hyaluronidase (ALT-B4) technology, which changes the formulation of subcutaneous injection (SC). Also, IPO momentum for Krafton and Market Kurly boosted venture capital stocks.

FOMC Watch Game

The building housing the Federal Reserve, the monetary policy-making body located in Washington, USA.

Market experts analyzed that the mixed trading on the day was due to differing views among market participants ahead of the U.S. Federal Open Market Committee (FOMC) meeting starting on the 16th. The FOMC is a meeting where the direction of U.S. monetary policy can be observed. The minutes are released one month later.

Most experts expect the accommodative monetary outlook to continue at this FOMC. However, they emphasized the need to monitor changes due to expected inflation and rising market interest rates. In particular, reactions or responses to the rising market interest rates and the dot plot regarding possible rate hikes are key factors to watch.

Lee Kyung-min, a researcher at Daishin Securities, said, "Ahead of the U.S. Federal Open Market Committee (FOMC) meeting starting on the 16th, the market fluctuated within a narrow range. Although the 10-year U.S. Treasury yield exceeded 1.6%, the pace of increase has somewhat slowed, and the market seems to be gradually adapting to the interest rate level."

He added, "Since expectations for the March FOMC are high, despite positive comments, the possibility of disappointment cannot be ruled out. However, even if there is no decisive action at the March FOMC and disappointment enters the market, it can be interpreted as a need to focus on the Federal Reserve's monetary policy direction."

Meanwhile, the USD/KRW exchange rate closed at 1,136.30 KRW. The rate started higher due to a decline in the dollar index but fell to the low 1,130 KRW range. It then rebounded slightly after confirmation of the yuan depreciation announcement.

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