Institutions Betting on a Bull Market vs "Sideways Range for Now"... KOSPI at a Crossroads

Foreigners Net Sell Again on 23rd
Institutions Buy Leverage Betting on Bull Market
"Uncertainty Increases Due to US-China High-Level Talks and Other Events"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] The KOSPI continues to fluctuate within the '3200 box range,' leading to mixed outlooks for the future. With institutions switching to buying mode and expectations for a major upward trend, alongside upcoming external events that increase market uncertainty, forecasts are divided on whether the index will remain within the box range for the time being.

According to the Korea Exchange on the 23rd, the KOSPI index started trading at 3,253.44, up 3.23 points from the previous day, briefly turned downward, then resumed its upward trend. As of 10:10 a.m., it recorded 3,262.77, up 12.56 points (0.39%) from the previous day.

The previous day, the KOSPI rose 1.07% to 3,250.21, marking an upward trend for the first time in five trading days. Institutions led the market rally by turning net buyers for the first time in over two months.

They poured in a flood of net purchases, driving the market higher. Institutions net bought 857.8 billion KRW that day, the largest amount since May 25. Other corporations also purchased stocks worth about 11.4 billion KRW. Foreigners' net buying amounted to approximately 89.8 billion KRW.

However, foreigners purchased 18,000 contracts of KOSPI 200 futures?the largest volume this year?firing expectations for a rise in the spot market. Thanks to foreign investors' activity, the market basis shifted to contango (where futures prices are higher than spot prices) based on closing prices for the first time in six trading days. Kim Daejun, a researcher at Korea Investment & Securities, analyzed, "The rise in market interest rates, including the US 10-year Treasury yield and oil prices, indicates a recovery in risk asset preference."

In particular, institutions boosted investor sentiment by net buying KODEX Leverage worth 118.1 billion KRW, betting on the KOSPI's upward momentum. The Leverage fund generates profits proportional to the KOSPI's rise. Institutions also net bought about 20.9 billion KRW of KODEX 200, while foreigners purchased 26 billion KRW of KODEX Leverage, signaling expectations for a market rally. Although the KOSPI touched 3,300 on the 6th, its return rate has been minus 1.37% since the beginning of this month through the previous day.

However, some expect that major upcoming events such as the high-level US-China talks next week and the US debt ceiling negotiations could heighten market caution, likely keeping the domestic market within the box range. US Secretary of State Wendy Sherman will visit China for two days starting on the 25th to meet Foreign Minister Wang Yi, discussing trade disputes and other friction points between the two countries. The market direction is expected to be influenced by whether a US-China summit is arranged through these talks.

Additionally, the US federal government's debt ceiling suspension period ends on the 31st of this month, and whether Congress approves an extension could weigh on the market. Han Daehun, a researcher at SK Securities, said, "The US Federal Reserve is continuing to increase purchases of Treasury Inflation-Protected Securities (TIPS) to prepare for inflation." With multiple events that could raise caution scheduled, the market is expected to continue fluctuating within the box range next week as well.

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