Foreigners Returning? "Institutions Also Buying Together"...Individual Sellers Tired of Correction Market

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 30th, the domestic stock market started higher, with simultaneous buying by foreigners and institutions increasing the gains. The market is interpreted to have received a positive impact as part of the Biden administration's second fiscal stimulus package is set to be unveiled on the 31st (local time).

On this day, the KOSPI opened at 3,038.44, up 0.08%. As of 11:03 a.m., it was trading at 3,057.83, up 0.65%. The KOSDAQ started at 954.54, up 0.05%, and is currently at 958.60, up 0.47%.

For now, the market is seen as sending a positive signal regarding the Biden administration's infrastructure investment policy, which includes tax increases. This stimulus package, focusing over $3 trillion (approximately 3,390 trillion KRW) on infrastructure investment, is divided into △‘physical’ infrastructure investments such as civil engineering and eco-friendly projects △social infrastructure investments such as education and healthcare. However, tax increases are also planned to finance this. U.S. Treasury Secretary Janet Yellen stated that this infrastructure plan would be accompanied by tax hikes. Accordingly, the interplay between tax increases and economic improvement effects makes the market impact calculation complex.

However, David Lefkowitz, head of U.S. equities at UBS Financial Services, told MarketWatch, "An increase in the corporate tax rate could moderately pull down the U.S. stock market, but American companies can still achieve healthy net profit growth." He also predicted, "Since the tax increase is at least partially for infrastructure-related spending, it can boost economic growth and partially offset the stock market decline caused by the tax hike."

Looking at trading trends by investor type, only individual investors, tired of the correction market, are net sellers. They sold 88.7 billion KRW and 19.2 billion KRW worth in the KOSPI and KOSDAQ markets, respectively. Foreigners and institutions are net buyers simultaneously. Foreigners bought 41.6 billion KRW in the KOSPI market and 9.1 billion KRW in the KOSDAQ market. Institutions are net buying 48.9 billion KRW in the KOSPI and 19.9 billion KRW in the KOSDAQ markets.

Kim Yumi, a researcher at Kiwoom Securities, said, "The margin call issue that burdened the U.S. stock market was partially reflected in the domestic market yesterday, and the rebound in the U.S. market is positive for the domestic market. However, concerns about U.S. tax increases, U.S.-China frictions, and a strong dollar are factors limiting the index's upward momentum."

Caution is also required. Ha In-hwan, a researcher at KB Securities, emphasized, "If the method of raising funds is through ‘tax increases (such as corporate tax),’ the stock market cannot help but become tense again." There is also a view that expectations for the $3 trillion stimulus should be lowered.

It took two months for the $1.9 trillion stimulus package to pass. The two-month delay was due to Republican opposition to the expansion of the fiscal deficit caused by the additional ‘large-scale’ stimulus. Therefore, if it took two months for the $1.9 trillion stimulus to pass, it is necessary to recognize that it will likely take even longer for the $3 trillion infrastructure investment policy to be approved, according to researcher Ha.

He said, "President Biden is expected to announce policies centered on ‘investment.’ While the three areas worth noting from an investment perspective (traditional infrastructure, eco-friendly, 5G) should be viewed positively, doubts about congressional approval may arise, so expectations should be lowered rather than being overly optimistic about the ‘$3 trillion’ figure."

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