"Overwhelmed by Recession Fears" Black Friday... KOSPI Drops to 2300, KOSDAQ Collapses Below 800

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 17th, the KOSPI fell below 2400, and the KOSDAQ dropped below the 800 mark. A 'Black Friday' scenario unfolded following a sharp plunge in the New York stock market. The market was heavily overwhelmed by concerns of an economic recession due to the Federal Reserve's (Fed) aggressive tightening.

On that day, the KOSPI opened at 2409.72, down 41.69 points (1.70%) from the previous session. It fell below 2400 shortly after the opening. The intraday break below 2400 on the KOSPI was the first in 1 year and 7 months since November 5, 2020 (2370.85). The KOSDAQ started the session at 787.97, down 14.18 points (1.77%), falling below the 800 level. The KOSDAQ index dropping to the 780s during the session was also the first time in 1 year and 8 months.

The New York stock market's collapse was largely influenced by the end of the 'relief rally' just one day after the Fed's significant interest rate hike. On the 16th (local time), the Dow Jones Industrial Average closed at 29,927.07, down 741.46 points (2.42%) from the previous session. The Dow falling below the 30,000 mark at closing was the first time in 1 year and 5 months since January last year. The Standard & Poor's (S&P) 500 index dropped sharply by 123.22 points (3.25%) to 3,666.77, and the tech-heavy Nasdaq index plunged 453.06 points (4.08%) to 10,646.10. The Nasdaq index is at its lowest level since September 2020. Despite a 0.75 percentage point rate hike?the largest in 28 years?the previous day, investors who had bought stocks due to uncertainty resolution and the Fed's strong commitment to price stability appeared burdened by ongoing expectations of further Fed rate hikes and the resulting possibility of an economic recession. Fed Chair Jerome Powell is expected to raise rates by 0.50 or 0.75 percentage points at the July meeting, indicating that aggressive tightening may continue in the short term. As tightening continues globally, concerns are growing that reduced global liquidity will slow economic growth.

Foreign investors, who had net bought the previous day, turned to net selling in the KOSPI market early in the session, with a selling bias of about 120.1 billion KRW. However, in the KOSDAQ market, they showed a net buying bias of 10.7 billion KRW. Individual investors showed a net selling bias of 6 billion KRW in the KOSPI market and a net buying bias of 5.6 billion KRW in the KOSDAQ market. Institutions were buying about 124.9 billion KRW in the KOSPI market while selling about 24.6 billion KRW in the KOSDAQ market.

All of the top market capitalization stocks in the KOSPI and KOSDAQ are on a downward trend. In particular, Samsung Electronics' stock price finally broke below 60,000 KRW. It opened at 59,400 KRW, down 2.46% that day. The decline slightly narrowed in the early session, trading at 59,800 KRW as of 9:16 AM.

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