Shaken by Omicron 投心... Index Experiences a 'Rollercoaster' Ride

Following the US Stock Market Plunge
Sharp Rebound on Foreign Buying
3 Trading Days of Divergence Between Korean and US Markets
"Difficult to See a Sustained Uptrend"

[Asia Economy Reporter Minji Lee] The domestic stock market is showing a rollercoaster pattern. Amid concerns over the spread of the 'Omicron' variant virus, the U.S. market plunged sharply, causing a simultaneous sharp decline in the Korean market, but it then rebounded rapidly, showing no clear direction. While foreign investors are resuming shopping for domestic stocks centered on semiconductors, individual investors who were actively buying in the 3000-point range of the index are exiting the market.

On the 2nd, the KOSPI opened at 2,874.86, down 0.86% from the previous day. Despite the sharp drop in the U.S. market the day before, it closed with a sharp rebound of 2.14%, but was affected by an additional drop of 1.34% in the Dow Jones and 1.83% in the Nasdaq in the early morning of the day.

However, a rebound buying trend soon emerged, and the index reversed to rise within 20 minutes of the market opening. At 9:32 a.m., it rose as much as 0.40% to 2,911.38. The rise in the index was led by foreign investors. Following nearly 1 trillion won in net purchases the previous day, they also net bought more than 140 billion won within the first hour of trading that day.

The items foreign investors are shopping for in Korean stocks are semiconductor stocks led by Samsung Electronics. Expectations for an improvement in the industry, such as the possible passage of the U.S. semiconductor chip production support bill, and the relatively undervalued appeal of the Korean stock market, which has been somewhat neglected, have attracted buying interest in Samsung Electronics and SK Hynix.

On the other hand, individual investors are using the rebound market created by foreigners to exit the market. The individual trading ratio, which was close to 80% last year, was around 67% as of June this year, but recently has fallen below 40%.

Typically, the KOSPI is more vulnerable when the U.S. stock market is highly volatile. Since the companies leading the domestic stock market are large export companies such as Samsung Electronics, they are inevitably heavily influenced by the U.S. economy. There are many cases where the KOSPI does not follow when the U.S. stock market rises, but it is rare for it to perform well when the U.S. stock market plunges.

However, this trend has recently appeared differently. Looking at the movements of the U.S. Dow Jones and the KOSPI over the past three trading days, they have been out of sync. On the 29th of last month, when the U.S. market rose, the KOSPI fell, and on the 30th of last month and the 1st of this month, when the U.S. market fell for two consecutive days, the KOSPI rose both days. In particular, foreigners have led the index rebound for two consecutive days following the previous day.

However, the securities industry forecasts that the KOSPI's rise is only a technical rebound and that it is difficult to see a trend of sustained increase. The transmissibility of the Omicron variant virus has not been confirmed, and the market is likely to reflect Omicron fears by lowering corporate earnings estimates.

Jung Yong-taek, head of IBK Investment & Securities Center, said, "With issues such as the inclusion of the U.S. Morgan Stanley Capital International (MSCI) index, the market is showing fluctuations due to foreign investors' supply and demand," adding, "Currently, the KOSPI has no fundamental changes and trading volume is not high, so it is premature to make hasty moves, and the impact of the Omicron variant virus is expected to continue for the time being."

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