'Giant's Foot' Trampled KOSPI... Samsung Electronics, the 'Foreigners' Target,' Where to Now?

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Volatility in the domestic stock market is expected to be high this week. Following the Federal Reserve's (Fed) 'giant step' of raising the benchmark interest rate by 75 basis points (0.75 percentage points) at once, the aftershocks of being trampled by the 'giant's foot' are likely to lead to a sensitive week. Various factors that could affect volatility are scattered, including Fed Chair Jerome Powell’s testimony, economic data releases, and Morgan Stanley Capital International (MSCI)’s announcement of the watchlist for developed market indices. In particular, the net selling trend of 'Samsung Electronics,' which has become a concentrated target of foreign investors, is also expected to impact the KOSPI decline.

According to the financial investment industry on the 19th, the domestic stock market is expected to be influenced by external variables and see increased volatility this week (20th?24th).

First, Chair Powell will appear as a witness at hearings in the U.S. House and Senate over two days on the 22nd and 23rd (local time). Since the semi-annual monetary policy is the main topic, he is expected to comment on the giant step taken at the recent Federal Open Market Committee (FOMC) meeting and the year-end benchmark interest rate outlook. Concerns are growing that raising the benchmark interest rate too quickly could lead to stagflation (economic recession accompanied by rising prices), so the market is likely to be swayed by Powell’s remarks.

On the 24th (Korean time), MSCI’s watchlist for the developed market index will be announced. Korea was included in the FTSE developed market index in 2009 but is still classified as an emerging market by MSCI. The securities industry is placing weight on the possibility of exclusion. If Korea is dropped, downward pressure on the stock market is expected to increase.

Earlier, the market accessibility evaluation results released on the 9th pointed out the need for improvement due to insufficient information for foreign investors, corporate governance issues, restrictions on short selling, and dividend disclosure standards differing from international norms.

Additionally, export data from June 1 to 20, the Purchasing Managers’ Index (PMI) for the Eurozone and the U.S. for May and June, U.S. industrial production for May, and the U.S. consumer sentiment index for June are also expected to influence the stock market.

Jo Byung-hyun, a researcher at Daol Investment & Securities, said, "Among various sentiment indicators, there will be high interest in the University of Michigan Consumer Sentiment Index. Last month’s index experienced a record decline, and concerns about consumption contraction have formed, so it can be used to gauge whether the contraction in consumer sentiment is coming to an end."

He added, "While attempts at a rebound may appear due to rising interest rates and valuation adjustments, meaningful rebounds are unlikely because of concerns about economic slowdown caused by the Fed’s inflation control and policy uncertainties."

Meanwhile, Samsung Electronics’ stock price is also expected to affect the market. The main reason for the downward pressure on the domestic stock market last week was the selling by foreign investors. Foreign investors sold about 1.9 trillion KRW worth of stocks in the KOSPI market. Samsung Electronics, the largest company by market capitalization, was the concentrated target. Of the 1.9 trillion KRW, 980 billion KRW was net selling of Samsung Electronics. If the worst-case scenario worsens, such as continued lockdown measures in China that could affect memory semiconductor prices, the selling pressure from foreign investors may increase, potentially causing further declines in Samsung Electronics’ stock price, warranting caution.

Kim Jang-yeol, head of the research center at Sangsangin Securities, said, "In a situation where concerns about a global economic recession are growing, Samsung Electronics’ profit outlook is of no short-term use to the stock price," adding, "Assuming the worst-case scenario with ongoing inflation and global geopolitical risks, a temporary sharp decline in the stock price is also possible."

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