KOSPI Falls to 2610 During 'Black Thursday' Trading... Where Is the Bottom?

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 27th, the KOSPI index plunged sharply, falling intraday to the 2610 level. This is the first time the KOSPI has dipped to the 2600 level intraday since December 3, 2020 (2672.85). The decline is attributed to the impact of Federal Reserve (Fed) Chairman Jerome Powell's announcement of interest rate hikes and the market debut of LG Energy Solution, the largest company since the founding of Korea.

As of 1:26 PM on the 13th, the KOSPI index is at 2625.89, down 3.06% from the previous day. The index opened at 2709.79, up 0.02% (0.55 points) from the previous trading day, but soon turned bearish and widened its losses.

Foreign investors are accelerating the index's decline. At this time, foreigners have net sold 1.5559 trillion KRW in the KOSPI market alone. They have also sold 314.4 billion KRW worth in the KOSDAQ market. Net selling is also recorded in the futures market. Meanwhile, institutions have bought about 1.6618 trillion KRW in the KOSPI market, but it appears insufficient to defend the index.

LG Energy Solution, which was listed today, is causing volatility in supply and demand. As of now, it is trading at 499,500 KRW, down 17.09% from the opening price.

The top market capitalization stocks are also all showing red. Among the top 100 KOSPI stocks, 97 are falling except for Kia, LG Innotek, and Hyundai Glovis.

By sector, air cargo transportation and logistics (1.16%) and transportation infrastructure (0.01%) are showing gains. On the other hand, electrical products (-12.08%), display panels (-7.10%), independent power production and energy trading (-6.04%), oil and gas (-5.48%), and household goods (-4.94%) are showing weakness.

Researcher Na Jeong-hwan of Cape Investment & Securities said, "The Fed announced that it would proactively inform the market about interest rate hikes or quantitative tightening after the January FOMC, but uncertainty regarding monetary policy may continue until before the March FOMC. Therefore, volatility in the domestic stock market is expected to persist."

Overnight, the New York stock market turned bearish following Chairman Powell's announcement of interest rate hikes. The Dow Jones Industrial Average closed at 34,168.09, down 129.64 points (0.38%) from the previous session. The Standard & Poor's (S&P) 500 index also fell 6.52 points (0.15%) to 4,349.93, but the tech-heavy Nasdaq index closed up 2.82 points (0.02%) at 13,542.12.

After the FOMC regular meeting ended, the Dow surged more than 500 points but reversed to a decline immediately after Chairman Powell stated at the press conference that "there is considerable room to raise rates without threatening the labor market."

Edward Moya of foreign exchange brokerage OANDA said in an investor note, as reported by CNBC, "It became clear immediately after Chairman Powell's press conference that the possibility of more rate hikes has increased." Additionally, the Fed's announcement of plans to begin balance sheet reduction after starting rate hikes also negatively affected investor sentiment. Due to the Fed's hawkish (monetary tightening preference) moves, the 10-year U.S. Treasury yield soared to 1.88%, placing additional pressure on interest rate-sensitive tech stocks.

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