'Black Monday' KOSPI Hits Lowest in 1 Year 7 Months... Threatened to Break 2500 "Broke the Floor, Basement Remains"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] It was truly a 'Black Monday' scenario. On the 13th, the KOSPI and KOSDAQ indices, which started lower, widened their losses until just before the market close, plunging more than 3% and 4%, respectively. Investor sentiment froze sharply under the weight of the worst inflation fears. There are even gloomy forecasts that a 'fear market' has begun due to the lack of any rebound momentum in the domestic stock market.

On that day, the KOSPI opened at 2,550.21, down 45.66 points (1.76%) from the previous session, and immediately dropped over 2% to the 2,540 level. It then continued to widen losses, falling to 2,510. Early in the session, it broke the intraday low of 2,546.80 recorded on the 12th of last month. The decline deepened in the afternoon, with the index falling more than 3%, breaking below the 2,510 level. It closed at 2,504.51, down 91.36 points (3.52%) from the previous session, barely holding the 2,500 mark. This was the lowest closing level since November 13, 2020 (2,493.97), marking the lowest point in 1 year and 7 months.

The KOSDAQ market saw even larger losses. It opened at 852.74, down 17.12 points (1.97%) from the previous session, and immediately dropped more than 2%, falling below the 850 level. The losses then widened to a sharp decline of over 3%, approaching the 840 level. In the afternoon, it began to fall more than 4%. It ultimately closed at 828.77, down 41.09 points (4.72%) from the previous session.

This is attributed to the 'high inflation shock.' The U.S. May Consumer Price Index (CPI) significantly 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%, marking the highest level in 41 years. There is growing speculation that the Federal Open Market Committee (FOMC) regular meeting in June could implement 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.

Lee Kyung-min, a researcher at Daishin Securities, explained, "The U.S. consumer price shock led to a panic selling market," adding, "Concerns over high-intensity tightening and a consumption shock have amplified stagflation (economic stagnation with rising prices) fears, expanding risk-averse sentiment."

Simultaneous selling by foreigners and institutions also fueled the KOSPI decline. Foreigners sold 500.6 billion KRW, marking seven consecutive trading days of net selling. Institutions also net sold 218.7 billion KRW. Only individuals were net buyers with 668.6 billion KRW. In the KOSDAQ market, individuals and foreigners were net buyers of 26 billion KRW and 44 billion KRW, respectively, while institutions sold 70.4 billion KRW.

All top market capitalization companies in the KOSPI closed lower. Naver (-5.93%), Hyundai Motor (-5.15%), Kakao (-4.49%), and SK Hynix (-4.35%) saw the largest declines. Samsung Electronics, the largest market cap stock, closed at 62,100 KRW, down 2.66% from the previous trading day. Samsung Electronics fell below 63,000 KRW during the session for the first time in 1 year and 7 months since November 13, 2020. By sector, medical precision (-6.85%), banking (-6.30%), construction (-5.18%), and services (-4.96%) showed declines. No sectors rose.

Among the top market capitalization companies in the KOSDAQ, all declined except for L&F (0.04%). Ecopro BM (-0.08%), Celltrion Healthcare (-1.96%), Kakao Games (-4.30%), HLB (-2.54%), Pearl Abyss (-5.65%), Celltrion Pharm (-4.00%), and Wemade (-4.32%) all fell.

Along with the index declines, the won-dollar exchange rate soared. In the Seoul foreign exchange market, the won-dollar rate closed at 1,284 KRW, up 15.1 KRW from the previous trading day. It opened at 1,280 KRW, up 11.1 KRW from the previous day, and during the session surged to 1,288.9 KRW, surpassing the yearly high (closing basis 1,288.6 KRW) recorded on the 12th of last month.

Volatility in stock indices and the won-dollar exchange rate is expected to remain high for the time being. There are even talks that the KOSPI may struggle to hold the psychological support level of 2,500. Park Sang-hyun, a researcher at Hi Investment & Securities, said, "The recent correction trend may only calm down after the FOMC meeting, but the market will find stability or rebound momentum only when inflation risks subside. Since no one can predict when inflation will ease, market instability is likely to continue for some time." He added, "It is difficult to say what the bottom is right now, and it could fall further."

Han Ji-young, a researcher at Kiwoom Securities, forecasted, "The domestic stock market is expected to continue a phase of increased volatility, influenced by the weak pressure from the sharp rise in U.S. consumer prices in May, as well as key economic indicators such as U.S. and China retail sales and industrial production during the week, and the June FOMC event."

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