KOSPI Breaks Previous Low... Where Is the Bottom?

Declined to 2540 Level During Trading on the 12th
Securities Industry: "It Won't Fall Further"
Successful 1%+ Rebound Today

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As the KOSPI index has recorded a decline for eight consecutive trading days since May, concerns are spreading among investors that the KOSPI index may have broken through its bottom. In response, experts have diagnosed that although there will be no further significant decline due to the characteristic of the Korean stock market reflecting negative factors earlier than the U.S. stock market, a short-term rebound will also be difficult.

According to the Korea Exchange on the 13th, the KOSPI closed at 2,550.08, down 1.63% (42.19 points) from the previous session. This is the lowest level in one and a half years since November 2020 based on the closing price. In the afternoon, the decline widened, and the index fell to the 2,540 level during the session, marking a new low for the year. Especially, with eight consecutive trading days of decline this month, concerns spread among investors that the lower band of the KOSPI might have been breached.

Previously, the securities industry had forecast the KOSPI band for May to be between 2,500 and 2,840. Korea Investment & Securities Research Center suggested a May KOSPI band of 2,640 to 2,840, Daol Investment & Securities forecasted 2,560 to 2,780, and Kiwoom Securities expected 2,600 to 2,800. Some securities firms such as Eugene Investment & Securities and Shin Young Securities either did not provide a forecast for the lower band of the KOSPI or responded that they did not know.

Contrary to investors' concerns, the securities industry is gaining momentum in the view that the Korean stock market will not fall further. This is based on the judgment that the Korean stock market has downward rigidity due to its characteristic of reflecting negative factors earlier than the U.S. stock market. In fact, on the 13th, the KOSPI index opened at 2,570.01, up 0.78% (19.93 points) from the previous trading day, showing an upward trend as of the morning.

Kim Hak-gyun, head of the Shin Young Securities Research Center, said, "I do not know where the lower band of the KOSPI is," but added, "However, even if it falls further, it seems to be a range where recovery is possible."

Lee Kyung-soo, head of the Meritz Securities Research Center, also analyzed, "Considering the diversification of the KOSPI portfolio so far and the fact that corporate earnings are still maintained at around 180 trillion won, the possibility of falling below the 2018 peak is minimal."

However, the consensus is that a rapid rebound in the Korean stock market will be difficult. The basis is that there are no factors necessary for a rebound. Yoon Seok-mo, head of the Samsung Securities Research Center, interpreted, "There are no positive factors for our stock market such as inflation, prolonged Russia-Ukraine conflict, China's economic slowdown and shutdowns, or additional big-step rate hikes," adding, "Volatility expansion is inevitable."

Jang Hwa-tak, head of the DB Financial Investment Research Center, forecasted, "Stock prices will rebound when the perception that the inflation rate has peaked spreads."

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