'Worst Inflation' KOSPI Hits Lowest Point... KOSDAQ Also Plummets 3%

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 13th, the KOSPI, which started lower, widened its intraday losses and fell to the 2510 level. It is staggering under the worst inflation shock, recording the lowest level of the year.

On this day, the KOSPI opened at 2550.21, down 45.66 points (1.76%) from the previous session, and immediately showed a sharp decline of over 2%, dropping to the 2540 level. Afterwards, it continued to widen its losses and plunged to 2510. It fell to 2519.53, breaking the year-to-date low of 2546.80 recorded intraday on the 12th of last month. As of 10:26 a.m., the KOSPI was at 2521.02, down 73.86 points (2.88%) from the previous trading day.

The decline in the KOSDAQ market is even greater. The index, which plunged more than 2% as soon as the market opened, fell below the 850 level. Afterwards, it widened its losses and is showing a sharp decline of over 3%. The index approached the 840 level.

The U.S. May Consumer Price Index (CPI) greatly exceeded market expectations, intensifying inflation fears and pressuring financial markets. The U.S. Department of Labor announced on the 10th (local time) that the May CPI recorded 8.6%. The May CPI was 0.3 percentage points higher than the market expectation of 8.3%, and it is the highest in 41 years. The market is gradually raising expectations that the Federal Open Market Committee (FOMC) regular meeting in June may take a 'giant step' by raising the benchmark interest rate by 0.75 percentage points at once. The Fed has never implemented such a rapid rate hike since 1994.

The supply and demand environment is also unfavorable. Foreigners and institutions are selling, while individuals are buying, but it is insufficient. As of 10:30 a.m., foreigners have been net sellers for seven consecutive trading days, selling 219.4 billion KRW in the KOSPI market, and institutions, which showed buying momentum early in the session, also turned to selling, offloading 138.2 billion KRW, fueling the index's decline. Only individuals are net buyers, purchasing about 336 billion KRW.

By sector, all sectors are declining. The insurance sector, which was the only one to rise early in the session, also turned to decline. Banks fell the most by 4.94%, followed by medical precision (4.37%), transportation equipment (3.76%), services (3.77%), construction (3.72%), textiles and apparel (3.39%), securities (2.95%), finance (2.87%), machinery (2.84%), steel and metals (2.71%), all showing weakness.

Among the top market capitalization stocks, all turned red. Among the top 30 by market capitalization, only S-OIL showed a slight rise. Samsung Electronics is down 2.19% at 62,400 KRW. During the session, it fell to 62,100 KRW, setting a new 52-week low.

Seo Sang-young, head of Media Content at Mirae Asset Securities, said, "The U.S. stock market plunged after the CPI announcement as expectations for inflation easing weakened, and the possibility of U.S. consumption slowdown due to sustained high prices has brought in recession concerns, which burdens the Korean stock market," adding, "The market will show significant changes while waiting for the FOMC."

Han Ji-young, a researcher at Kiwoom Securities, also said, "The Korean stock market has been under bearish pressure since early this week due to the shock of the sharp rise in U.S. consumer prices in May. It will continue a phase of increased volatility influenced by major economic indicators such as U.S. and China retail sales and industrial production, as well as the June FOMC event," advising, "Although there is a possibility of a sell-off, considering the market valuation attractiveness and favorable earnings outlook, it is appropriate to respond with a wait-and-see approach rather than joining the sell-off."

Na Jeong-hwan, a researcher at Cape Investment & Securities, said, "It is affected by the U.S. high inflation shock," adding, "The biggest factor affecting overall inflation is oil prices, and it seems difficult for oil prices to calm down until the Russia-Ukraine war ends." He continued, "U.S. Treasury yields and the strong dollar are all burdens on the KOSPI," but added, "However, the upward trend in KOSPI corporate earnings forecasts will provide downside support."

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