Increased Downward Pressure Ahead of Options Expiration... KOSPI Direction Remains 'Stagnant'

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The KOSPI has been fluctuating around the 3250 level throughout the trading session on the 8th. It is under downward pressure due to strong profit-taking desires. In the short term, the index is expected to remain directionless.

As of 1:48 PM on the day, the KOSPI is trading at 3252.95, up 0.03% from the previous day. The index opened at 3251.83, down 0.29 points (0.01%).

By investor type, individual and foreign investors are net sellers of approximately 53.1 billion KRW and 209 billion KRW respectively. Only institutions are net buyers, purchasing about 283.5 billion KRW.

The top 10 market capitalization stocks are showing mixed trends. Weak sectors include machinery (-4.47%), medical precision instruments (-2.12%), and electric and gas utilities (-1.81%), while strong sectors are transportation and warehousing (+2.80%), pharmaceuticals (+1.43%), and telecommunications (+0.88%).

The KOSDAQ is trading at 987.55, up 0.17% from the previous day. The index opened at 986.43, up 0.57 points (0.06%). Individuals and institutions are net buyers of about 8.5 billion KRW and 33.9 billion KRW respectively, while foreign investors are net sellers of 18.3 billion KRW. Strong sectors include internet (+1.95%), other services (+1.51%), and distribution (+1.18%), whereas weak sectors are other manufacturing (-1.47%), metals (-1.22%), and entertainment and culture (-1.19%).

Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic stock market is under downward pressure due to uncertainty surrounding the US consumer price announcement and increased profit-taking from short-term level burdens. Although the favorable export-import growth rate of China, Korea's main export partner, in May and the fact that major large-cap stocks such as semiconductors and automobiles, which had been sluggish for some time, are bottoming out are positive factors for the overall Korean stock market, the burden of digesting major macro events this week suggests that the index's direction will remain stagnant in the short term."

Shin Jung-ho, a researcher at Ebest Investment & Securities, emphasized, "At this point, the applicable investment idea is to respond with a quality-focused approach without further increasing the proportion of leading stocks rather than spreading risk assets."

Meanwhile, on Wall Street, there is growing speculation that discussions on tapering (reduction of bond purchases) will begin as early as this month's Federal Reserve (Fed) Federal Open Market Committee (FOMC) regular meeting. CNBC reported, "The Fed is in the initial stage of preparing the financial markets for tapering," and "It is expected that tapering will be discussed at next week's FOMC regular meeting." Although some market participants speculated that tapering might be delayed due to May's new employment figures falling short of expectations, it is expected to begin as scheduled around summer.

The timing for reducing the asset purchase program, which amounts to about 120 billion USD per month, is expected to be late this year or early next year. However, Wall Street is already concerned that the implementation of the Fed's tightening policy will cause significant shocks to the financial markets, especially the bond market. There are warnings that the so-called financial market 'spasm' phenomenon, which occurred after the Fed mentioned tapering in 2013, could reoccur.

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