KOSPI and KOSDAQ Hit New Year Lows 'Collapse'... Foreigners Already Invest 3 Trillion Won, 50,000 Electronics Countdown Panic

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 15th, the domestic market index, which started lower, widened its losses in the afternoon and closed the session by hitting a new yearly low. Caution ahead of the U.S. Federal Reserve's (Fed) Federal Open Market Committee (FOMC) meeting the next day weighed heavily on the index. The May Consumer Price Index (CPI) significantly exceeded expectations, fueling market fears that the Fed will implement a larger-than-expected interest rate hike, a so-called giant step (a 0.75 percentage point increase). Sharp net selling by foreign investors also increased downward pressure on the index. Foreign investors have been net sellers for nine consecutive trading days since the 2nd. During this period, they net sold stocks worth a total of 3.4584 trillion won in the KOSPI market.

On the day, the KOSPI closed at 2,447.38, down 45.59 points (1.83%) from the previous trading day, marking a new yearly low for the second consecutive day following the previous close of 2,492.97. The last time the KOSPI closed in the 2,440 range was on November 9, 2020 (2,447.20), about 1 year and 7 months ago. The index opened down 2.96 points (0.12%) at 2,490.01 and continued to widen its losses, falling as low as 2,436.04 at one point.

The KOSDAQ closed at 799.41, down 24.17 points (2.93%) from the previous day. This was the first time in 1 year and 10 months since August 21, 2020 (796.21) that the KOSDAQ closed below the 800 mark. Lee Kyung-min, a researcher at Daishin Securities, said, "Ahead of the FOMC, caution about the meeting results has entered the market," adding, "Concerns about a recession due to the inversion of the U.S. Treasury yield curve between short- and long-term bonds have further amplified anxiety."

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "Overnight, the U.S. stock market saw increased volatility as the possibility of a 75 basis point Fed rate hike became prominent and the 10-year Treasury yield surged. The domestic market also declined amid heightened caution toward the FOMC, and the burden on tech stocks due to rate hike concerns persisted, causing the KOSDAQ to fall below 800 during the session, with most of the top market capitalization stocks showing declines."

Net selling by foreign investors pressured the market indices. On the day, foreign investors sold 454.4 billion won and 146.9 billion won in the KOSPI and KOSDAQ markets, respectively. Although individual investors bought 346.3 billion won and 89 billion won in the two markets, respectively, it was insufficient to counteract the selling pressure. Institutional investors alternated between net selling and net buying during the session, ending with net purchases of 73.4 billion won and 66.6 billion won in the two markets, respectively.

Lee Woong-chan, a researcher at Hi Investment & Securities, said, "Ahead of tomorrow's FOMC announcement, interest rates continued to rise, leading to foreign capital outflows," adding, "The FOMC event, which will be announced tomorrow, is so significant that China's retail sales data did not have much impact." He further explained, "It is important to observe whether the Fed will demonstrate its determination to control inflation and interest rates."

Most of the top market capitalization stocks showed declines. Samsung Electronics closed down 1.94% at 60,700 won. During the session, it fell to 60,200 won, hitting a 52-week low, causing investors to fear entering the 50,000 won range. HYBE also saw a significant drop. The news that the group BTS (Bangtan Sonyeondan) will suspend group activities after 9 years since debut affected the stock. BTS announced during a live broadcast on YouTube on the 14th that all seven members are preparing solo albums. HYBE closed sharply down 24.87% at 145,000 won on the day.

In the market, the lower bound of the KOSPI is seen in the 2,400 range, but some say that making any assumptions is meaningless. Kim Hak-gyun, head of the research center at Shin Young Securities, said, "Concerns about whether the Fed can control inflation are growing and affecting the stock market," adding, "Predicting the lower bound of the KOSPI itself is meaningless and futile."

Meanwhile, the won-dollar exchange rate closed at 1,290.50 won, up 4.10 won from the previous trading day. This is the highest closing rate in 13 years since July 14, 2009, when it recorded 1,293.00 won.

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