Stock Market Calmed After Urgent Drop, But Still Red-Hot...

Reduced Likelihood of Russian Invasion
Stock Market Starts Higher and Maintains Uptrend
Inflation, Oil Prices, and Various Factors Expected to Influence

The domestic stock market reacted positively as Russia stepped back from its posture of invading Ukraine. With investor sentiment, which had been subdued due to the possibility of war, reviving, on the 16th, the KOSPI and KOSDAQ opened the session up by 1.58% and 2.83%, respectively, compared to the previous trading day.

On that day, all stocks on the KOSPI, from the leading stock Samsung Electronics to Kia, ranked 10th in market capitalization, rose. In particular, SK Hynix and LG Chem showed notable strength. The bullish trend was even stronger among KOSDAQ stocks. Stocks ranked from 1st to 40th in market capitalization all showed strong gains.

However, there are various variables that prevent this from being seen as the start of a trend reversal.

First, although it is reported that Russian troops have partially withdrawn, the market remains tense because Russia’s invasion plans have not been canceled. Sangyoung Seo, a researcher at Mirae Asset Securities, analyzed, "Whether the Russian military will continue to withdraw is something that can only be confirmed as negotiations progress further, so the overall financial market trend is not entirely positive."

While crude oil prices, which had surged amid easing tensions, have started to decline, the fact that they remain around the $90 mark is also a burden. On the 15th (local time), the March West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange (NYMEX) closed at $92.07 per barrel, down $3.39 (3.55%) from the previous day. Rising international oil prices could accelerate the global economy’s timeline for measures such as interest rate hikes to curb inflation. Jaeseon Lee, a researcher at Hana Financial Investment, said, "The range where WTI exceeds $90 is a period in which price stabilization is delayed," adding, "There is a high possibility that safe-haven asset preference sentiment will be highlighted."

Even if Russia’s invasion is canceled from this point onward, the previously missed inflation trends and the Federal Reserve’s moves in the war against inflation are likely to be key to a trend reversal in the stock market. Tightening by major countries including the U.S. absorbs liquidity from the stock market. The inflation data released the day before further supports the Fed’s tightening stance. In January, the U.S. Producer Price Index (PPI) rose 1.0% month-on-month and 9.7% year-on-year, significantly exceeding market expectations. The market had forecast a 0.5% month-on-month and 9.1% year-on-year increase. Accordingly, the U.S. 10-year Treasury yield briefly surpassed 2% again.

After the market closes that day, the minutes of the January Federal Open Market Committee (FOMC) meeting will be released. Since Fed officials have mentioned the possibility of a 50 basis point hike next month, there is heightened caution regarding the content of the minutes.

Jiyoung Han, a researcher at Kiwoom Securities, said, "Producer prices are increasing concerns about inflation entrenchment and prolongation, but after the consumer price surprise (7.5%) announced on the 10th, the market can be seen as having partially reflected the shock," adding, "It is impossible for U.S. inflation to rapidly drop to a stable 2-3% range in the short term, but I believe the possibility of an inflation peak-out in the first half of the year remains valid."

In particular, as of 10:35 a.m. that day, the KOSPI was supported by net buying of 33.1 billion KRW by individual investors alone, sustaining the index’s rise (2718.61, 1.53%). As the possibility of conflict weakened, the won-dollar exchange rate fell 0.23% from the previous session to 1,197.00 KRW, and foreign investors continued net selling (11.7 billion KRW).

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