Giant Step Concerns 'Full of Caution'... Widening Decline "Slipping Down to 2460"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 15th, the domestic major stock indices started lower and expanded their losses during the session, showing a fearful sentiment. Heightened caution ahead of the June Federal Open Market Committee (FOMC) meeting is weighing down the indices. The May Consumer Price Index (CPI) significantly exceeded expectations, rapidly raising forecasts that the Federal Reserve (Fed) will implement a larger-than-expected interest rate hike, a so-called giant step (0.75 percentage point increase). From the start of the session, aggressive net selling by foreign investors has also increased downward pressure on the indices.

On this day, the KOSPI opened down 2.96 points at 2490.01 (0.12%↓). The KOSDAQ started the session down 1.31 points at 822.27 (0.16%↓). Both indices then managed to turn positive before falling again and widening their losses. The KOSPI slid to the 2460 level, and the KOSDAQ dropped to the 800 level. As of 10:42 a.m., the KOSPI was at 2471.20, down 0.87% from the previous trading day, and the KOSDAQ was at 813.01, down 1.28%.

Foreign investors have been continuously selling since the market opened. Individual investors have also joined in selling. Only individuals are buying. Foreign investors are net sellers of 276.2 billion KRW and 141.7 billion KRW in the two markets, respectively. Individuals are net buyers of 288.8 billion KRW and 148.3 billion KRW, respectively. Institutions have sold about 17.8 billion KRW and 0.2 billion KRW in the two markets, respectively.

The KOSPI sectors show mixed trends. Weak sectors include Paper & Wood (-3.87%), Services (-3.39%), and Medical Precision (-1.90%), while strong sectors include Food & Beverage (+2.60%), Pharmaceuticals (+0.48%), and Non-metallic Minerals (+0.48%). The KOSDAQ shows a similar pattern. Weak sectors are Entertainment & Culture (-2.75%), Software (-2.75%), and Publishing & Media Replication (-2.66%), while strong sectors are Transportation (+2.10%), Other Manufacturing (+1.20%), and General Electric & Electronics (+0.86%).

Top market capitalization stocks in both KOSPI and KOSDAQ also show mixed movements. Samsung Electronics and SK Hynix have fallen more than 1%. Hyundai Motor and Kia are strong following the end of the Cargo Solidarity Union strike. EcoPro BM is up over 2%, while Celltrion Healthcare and L&F have risen less than 1%. CJ ENM and Studio Dragon are down around 2%.

Seo Sang-young, Head of Media Content at Mirae Asset Securities, said, "The intraday rebound buying in tech stocks, which had recently fallen ahead of the FOMC in the U.S. stock market, is positive for the Korean stock market, but concerns related to the economic recession persist." He added, "Ahead of the FOMC, the Korean stock market will likely see differentiation centered on stocks that had large declines."

Han Ji-young, a researcher at Kiwoom Securities, noted, "Caution ahead of the June FOMC is limiting the upper range of the index."

Meanwhile, there are forecasts that breaking below 2400 on the KOSPI will not be easy. Kang Dae-seok, a researcher at Yuanta Securities, said, "Although pessimism may prevail, it is necessary to assess the current level of decline. While the realization of an economic recession could be a risk factor for further declines, it is judged that much of the negative factors that the KOSPI can reflect have already been priced in." Lee Jae-sun, a researcher at Hyundai Motor Securities, said, "The possibility of breaking below 2400 is low. The KOSPI has fallen below the trailing PBR (price-to-book ratio) of 1 at the 2520 level, which appears to be a panic selling market with generally weakened investor sentiment."

Choi Yoo-jun, a researcher at Shinhan Financial Investment, said, "Breaking below 2400 means heading toward an economic recession." He added, "The May inflation data that shocked the market has seasonal characteristics, so oil prices may calm down after the summer." He further explained, "Unless the Russia-Ukraine war intensifies or unexpected variables emerge, there is a high possibility that 2400 will hold."

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