Stock Market Falls Below 3200 and 1000 Levels, May Strategy Insights

Return of Foreign Investors, Continued Selling
Impact of Short Selling Resumption on the 3rd of Next Month
Investor Sentiment Weakens
"Economic Recovery and Strong Corporate Earnings Will Support Market Rise"
Securities Firms Advise Increasing Exposure

[Asia Economy Reporter Song Hwajeong] The KOSPI and KOSDAQ, which had been strong this month, showed signs of hesitation ahead of May. On the 28th, the 3200 level for KOSPI and the 1000 level for KOSDAQ were broken. Especially as May, a month when many believe stocks should be sold, approaches, investors' concerns are deepening. Experts predict that this May is not the time to sell stocks but rather to increase holdings.

As of 9:45 a.m. on the 29th, the KOSPI was down 18.68 points (0.59%) from the previous day at 3162.79, and the KOSDAQ fell 14.03 points (1.41%) to 984.24. Both started the day with gains but soon turned to declines. The previous day, the KOSPI closed down 1.06% at 3181.47, falling below the 3200 level, and the KOSDAQ dropped 2.23% to 998.27, falling below 1000 for the first time in 13 trading days.

In the first four months of this year, the KOSPI set new all-time highs twice, and the KOSDAQ reached the 1000 level for the first time in 20 years. There was also a two-month correction period. Investors have no choice but to be more cautious with their May strategies. Since the market showed a correction after reaching a high in January, there are concerns that this pattern may repeat, along with the impact of short selling resuming on the 3rd of next month, which is dampening investor sentiment. Additionally, since foreigners returned this month but recently weakened their selling pressure, there is caution about a possible pattern similar to the surprise rebound in November last year followed by a shift to selling.

Especially considering the seasonality of May, investors' concerns are bound to deepen. The market adage "Sell in May and go away" reflects the strong perception that stocks should be sold in May.

The securities industry expects the market rally to continue through May. Accordingly, many opinions suggest that this May is a time to hold or increase stock positions rather than sell. Kim Byung-yeon, a researcher at NH Investment & Securities, said, "Global stock markets have often recorded weakness from May through summer," adding, "This is linked to a decrease in global industrial production coinciding with the driving season in developed countries. However, this year, as it corresponds to the period of overcoming COVID-19 with expanded vaccination, production decline is not prominent, and consumption is expected to expand." Kim also noted, "Although there are concerns about momentum slowing due to the pre-reflection of economic improvement expectations, overall economic sentiment remains at a high level, and inflation indicators are stabilizing after base effects, creating an environment around the stock market similar to a Goldilocks scenario," concluding, "This May is the time to increase holdings."

Analysts believe that global economic recovery and strong corporate earnings will support the market's strength. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "The expected KOSPI range for May is 3100 to 3340," adding, "There will be intense battles among investors around the 3200 level, and the resumption of short selling on the 3rd of next month could act as a factor hindering index gains. However, considering market fundamentals, the KOSPI is expected to continue its upward trend supported by the U.S.-led economic recovery and strong corporate earnings."

Kim Yong-gu, a researcher at Samsung Securities, said, "The KOSPI in May is expected to move between 3050 and 3300, showing a neutral level of price movement," adding, "The KOSPI's low reflects rapid improvements in export and profit environments, rising to the 3050 level, so it would be more advantageous to hold (Stay in May) rather than sell (Sell in May) stocks."

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