'Eye Booger Rise Close' Foreigners Switch to Buying While Individuals Busy Selling... The 'Relief Rally' That Didn't Come

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 16th, the domestic stock market started with gains but gave up most of the morning's rise in the afternoon, managing only a slight gain by the close. The increase was less than 0.5%.

On that day, the KOSPI closed at 2451.41, up 4.03 points (0.16%↑), and the KOSDAQ ended at 802.15, up 2.74 points (0.34%↑). The KOSPI opened at 2481.66, up 34.28 points (1.40%↑), attempting to break the 2500 mark but gave up most of the gains in the afternoon. The KOSDAQ also started at 812.95, up 13.54 points (1.69%↑), hovered near the 830 level but ultimately closed just above the 800 mark.

The New York stock market rallied on relief as it interpreted the most aggressive interest rate hike in 28 years as a sign that inflation could be controlled. The domestic market also viewed this as an opportunity for market stabilization and closed higher, but the afternoon gains were trimmed due to the influence of the U.S. futures market.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The Korean stock market rose as uncertainties over the Federal Open Market Committee (FOMC) were resolved. Foreign investors showed buying momentum for the first time in 10 trading days, and the electrical and electronics sectors, including Samsung Electronics and SK Hynix, rebounded. However, the decline in U.S. index futures partially reduced the domestic index gains."

Lee Kyung-min, a researcher at Daishin Securities, also explained, "Although the rate hike itself was hawkish, the Fed's expression of determination to control inflation positively eased investor anxiety. However, as U.S. after-hours futures gave up their gains during the session, the KOSPI's gains also narrowed."

At the U.S. June FOMC regular meeting held on the 15th (local time), a 0.75 percentage point (75 basis points, 1bp=0.01%) increase in the benchmark interest rate was decided. This giant step by the Federal Reserve (Fed) was the first in 28 years since 1994. It is interpreted as a decisive move following the higher-than-expected U.S. May Consumer Price Index (CPI) released last week. As a result, the U.S. benchmark interest rate rose from 0.75?1% to 1.5?1.75%. The market was relieved, expecting that this strong measure would help curb inflation, which hinders economic growth, and restore price stability. Moreover, Fed Chair Jerome Powell's expression of confidence in the economy also injected positive sentiment into the market.

As the domestic market started higher, individual investors stopped their previous buying spree and turned to selling. Meanwhile, foreign investors switched to net buying for the first time in 10 trading days. In the KOSPI market, foreign investors net bought 146.8 billion KRW. Conversely, individuals and institutions were net sellers by 156.9 billion KRW and 18.9 billion KRW, respectively. In the KOSDAQ market, foreign investors and institutions net bought 109.4 billion KRW and 92.8 billion KRW, respectively, while individuals net sold 207.9 billion KRW.

Among the top market cap stocks in the KOSPI, LG Chem rose more than 4%. Leading secondary battery stocks such as LG Energy Solution and Samsung SDI showed gains of 1?3%. This is attributed to LG Energy Solution's large-scale facility investments and Samsung SDI's earnings expectations. On the other hand, Naver, Kakao, Hyundai Motor, and Kia declined. Samsung Electronics, which had been pushed into the '50,000 KRW electronics' crisis, managed a rare rebound, closing at 60,900 KRW.

Among the top market cap stocks in the KOSDAQ, Cheonbo rose more than 4%. L&F also recorded gains exceeding 3%. EcoPro BM, Kakao Games, and CJ ENM each closed with gains in the 1% range. HLB's stock price fell more than 2%, while Pearl Abyss and Celltrion Pharm showed slight declines.

Experts believe that the market's relief rally is still premature. Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic market, which had hit new lows due to a sell-off in the previous session, rebounded today supported by the fading impact of the Fed's June giant step and the sharp drop in the won/dollar exchange rate (currently down more than 10 KRW offshore). However, the direction of oil prices, which most significantly affect future inflation expectations, has become crucial. The market needs to digest the June consumer price data scheduled for July (expected to confirm a peak-out) and the July FOMC event (expected 75bp hike) before a full relief rally can unfold."

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