South Korea Also Shows 'S Fear' Caution... Domestic Stock Market Ends with a Struggling Rise

KOSPI Recovers to 2670 Level in One Day
Early Gains Lost Amid Over 5% Inflation Rate
KOSDAQ Turns Weak Midday but Ends Strong with Late Buying Pressure

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] The domestic stock market closed higher on the 3rd. The market started on an upward trend amid speculation that the U.S. Federal Reserve (Fed) might slow down the pace of interest rate hikes, but quickly turned cautious from early trading as domestic high inflation indicators were released. The KOSDAQ index also showed weakness during the session.

The KOSPI index closed at 2,670.65, up 11.66 points (0.44%) from the previous day. The index opened with a 0.77% gain but gave up most of the early gains during the session.

The consumer price index (CPI) for South Korea in May, announced by Statistics Korea, recorded the highest increase in 13 years and 9 months, limiting the upside of the index.

According to Statistics Korea, the May consumer price index was 107.56 (2020=100), up 5.4% compared to the same month last year. This rate of increase is the highest since August 2008 (5.6%).

Institutions led the market by net buying stocks worth 322.8 billion KRW, supporting the rise, but foreign investors, who showed a selling bias from the market open, switched to net buying mid-session before unloading sell orders at the end, ultimately recording net sales. The net foreign selling amounted to 9.2 billion KRW. Individual investors net sold 308.5 billion KRW. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Today, the domestic market saw institutions buy over 200 billion KRW in cash stocks, influenced by institutional arbitrage trading amid foreign futures buying."

The U.S. stock market closed higher the previous day as expectations grew that the Fed would slow the pace of rate hikes due to weak private sector employment data. However, Fed officials expressed mixed views on tightening, and with the U.S. May nonfarm payroll data scheduled for release that night, market outlooks on Fed policy could change, leading to cautious sentiment in the domestic market.

Lee Kyung-min, a researcher at Daishin Securities, said, "Looking at Korea's inflation indicators, the burden of tightening remains, so the domestic market is not gaining upward momentum. There is a wait-and-see sentiment ahead of the U.S. employment data release tonight, and compared to the U.S., which showed a large drop earlier this year, the market is holding up relatively well, resulting in less of a rise than the U.S."

In the KOSPI market, corporate values showed differentiated trends based on foreign reports. LG Chem (2.63%) rose after Goldman Sachs named it a top pick in the electric vehicle battery sector, while Samsung SDI (0.00%) showed continuous weakness following a sell report from Citi Securities.

Kakao rose 2.39%, and Samsung Electronics (0.15%) and Samsung Biologics (1.07%) also closed higher. On the other hand, LG Energy Solution (0.68%), NAVER (-0.86%), Hyundai Motor (-0.27%), and Kia (-1.76%) showed weakness.

By sector, chemicals and banks posted gains of over 2%, while food and beverage, textiles and apparel, and non-metallic minerals recorded slight declines.

The KOSDAQ closed at 891.37, up 0.37 points (0.04%) from the previous day. Individuals net bought stocks worth approximately 175.9 billion KRW, institutions switched to net buying of 3.9 billion KRW at the end, while foreigners sold about 161.7 billion KRW.

Among the top market cap stocks on KOSDAQ, Celltrion Healthcare (0.98%) and Celltrion Pharm (0.74%) rose on news of Celltrion's U.S. rheumatoid arthritis biosimilar (CT-P47) Phase 3 clinical trial, while most other stocks were weak. In particular, L&F (-3.96%) and HLB (-3.56%) fell more than 3%.

Hyundai Feed, which surged recently due to concerns over food shortages, plunged 12.33%, and Hurim Robot, which soared over 20% the previous day, dropped 10.87%.

Additionally, Seoyeon Top Metal, Daesung Eltec, Samsung SPAC No.4, and Seoam Machinery Industry closed at the daily limit. Cheongdam Global, listed on the KOSDAQ market that day, surged 17.54%.

Researcher Kim said, "The Bank of Korea has raised this year's inflation forecast to 4.5%, and the Korea Development Institute (KDI) also expects a high level of 4.2%. However, economic growth forecasts have been revised downward due to the impact of high inflation, intensifying concerns about stagflation characterized by 'high inflation and low growth.'"

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