Powell's 'Big Step' Fear Tenses KOSPI... Individuals' 1 Trillion and 'Zhong Recovery' Bring Relief

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 22nd, the KOSPI started lower due to the Federal Reserve's (Fed) tightening measures, dropping to the 2690 level, but closed by recovering above 2700 thanks to aggressive net buying by individuals and a midday rebound in the Chinese stock market.

On that day, the KOSPI closed at 2704.71, down 23.50 points (0.86%). It opened at 2704.72, down 23.49 points (0.86%), and the intraday decline deepened, breaking below the 2700 level. However, it rebounded in the afternoon and closed above 2700. The KOSDAQ ended the day at 922.78, down 6.90 points (0.74%). It also started at 922.77, down 6.91 points (0.74%), breaking below the 920 level during the session but recovered in the afternoon to close above it.

Fed Chair Jerome Powell, on the 21st (local time), attended a discussion on the international economy at the International Monetary Fund (IMF) meeting and said regarding interest rate hikes, "In my view, moving more quickly would be appropriate," adding that "a 50bp increase will be considered at the May meeting." This statement was the cause of the KOSPI's weakness that day. It hinted at the possibility of a 50bp rate hike at the Federal Open Market Committee (FOMC) regular meeting scheduled for May 3-4. The market is increasingly expecting the Fed to take at least three 'big steps' of 0.5 percentage point rate hikes during the remaining six FOMC meetings this year. Powell also suggested during the discussion that the market is generally responding appropriately and that there may be multiple 50bp rate hikes, not just one in May.

Lee Kyung-min, a researcher at Daishin Securities, explained, "Today, foreigners sold more than 1 trillion won in futures, worsening the basis, which led to net selling of financial investment stocks (out of 630 billion won net selling by institutions, 540 billion won was by financial investment), increasing downward pressure on the stock market. However, the Chinese financial authorities' commitment to supporting the stock market helped the Chinese market recover most of its intraday losses, limiting further declines in the KOSPI."

On that day, foreigners' net selling amounted to 156.3 billion won in the KOSPI market and 88.1 billion won in the KOSDAQ market. Institutions, which had shown net buying the previous day, switched back to net selling in just one day, selling 698.6 billion won and 170.3 billion won in the KOSPI and KOSDAQ markets, respectively. All of this was absorbed by individuals, who showed unstoppable buying, with net purchases of 837.5 billion won and 279.6 billion won in the two markets, respectively.

By sector in the KOSPI, paper and wood (1.68%), insurance (1.31%), and food and beverages (1.09%) rose, while banks (-1.91%), services (-1.75%), and textiles and apparel (-1.56%) fell. In the KOSDAQ sectors, food, beverages, and tobacco (1.89%) and transportation (0.84%) rose, while broadcasting services (-2.18%) and entertainment and culture (-2.11%) declined. All of the top 10 KOSPI market capitalization stocks fell. In particular, Naver showed weakness for the second day due to disappointing first-quarter earnings. Among the top market capitalization stocks in the KOSDAQ, only Pearl Abyss rose, while Kakao Games and HLB saw declines of over 3%.

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