This Week's KOSPI... Foreign Selling Pressure and Forced Liquidation Fear: "Will 2300 Break?"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Attention is focused on whether the KOSPI can hold the 2300 level this week. This is based on the judgment that supply and demand conditions, such as continued foreign selling pressure due to high exchange rates, will act as downward factors for the index.

According to the financial investment industry on the 26th, the weekly expected band's lower bound for the KOSPI this week is at the 2200 level. This means the 2300 level could be broken. In particular, NH Investment & Securities set the bottom at 2250. Kim Young-hwan, a researcher at NH Investment & Securities, said, "The inversion of the benchmark interest rates between Korea and the U.S. is linked to the rise in the won-dollar exchange rate and concerns about foreign capital exiting the Korean capital market, which will make investor sentiment uneasy." He added, "Consumer confidence indices and PMI sentiment indicators from major countries such as the U.S., Europe, and China are about to be released, but it is unlikely that positive figures will be expected. Korean exports are expected to turn negative; although the decrease in operating days will not immediately lead to downward revisions of earnings estimates, psychologically it will be difficult to have a positive effect."

Opposite sales by individual investors are also acting as downward pressure on the stock market. According to the Korea Financial Investment Association, the average daily amount of opposite sales this month was 21.2 billion won, a 28% increase compared to the previous month. Researcher Kim said, "Cases where individuals who borrowed funds from securities companies to invest face collateral shortages have increased," and "the increase in opposite sales is a signal indicating a contraction in individual investor sentiment."

Therefore, the dominant view is that it will be a volatile week. Heo Jin-wook, a researcher at Samsung Securities, said, "Concerns about a U.S. economic recession continue to expand in the global financial market," and "for the time being, the financial market is expected to show high volatility between recession and soft landing scenarios depending on indicator results."

There is also analysis that the market will show a box range movement around the 2300 level. Since inflation peak-out has not yet been confirmed and the possibility of a recession remains, it is necessary to check future economic indicators. Han Ji-young, a researcher at Kiwoom Securities, said, "Major countries' stock markets such as the U.S. and Korea are expected to show technical rebounds frequently, supported by the perception of excessive price drops and imminent expectations for Q2 earnings," adding, "Until the economic indicators such as June inflation and Q2 GDP growth rate, which are scheduled to be announced in July, and the perception of the disappearance of the 75bp hike after the July Federal Open Market Committee (FOMC) appear, the market will remain in a box range."

Investor attention is expected to focus on the flow of major real economy indicators this week. Key schedules include the release on the 28th of the U.S. April S&P/Case-Shiller Home Price Index and the U.S. June Conference Board Consumer Confidence Index. On the 29th, the Eurozone June European Commission Consumer Confidence Index and the U.S. Q1 GDP (final) will be released. On the 30th, the Korean May Industrial Activity Trend, China's June National Bureau of Statistics PMI, and the U.S. May PCE Price Index will be announced. Then on July 1, the Korean June export-import trend, China's June Caixin Manufacturing PMI, Eurozone June Markit Manufacturing PMI, Eurozone June Consumer Price Index, and U.S. June ISM Manufacturing are scheduled.

Meanwhile, last week the KOSPI closed at 2366.60, down 74.33 points (3.05%) from the previous week's closing on the 17th. The intraday low on the 23rd (2306.48) fell 30.45% (1009.6 points) from the intraday high on June 25 last year (3316.08). The KOSDAQ also closed at 750.30, down 48.39 points (6.06%) from the previous week. The closing price on the 23rd was the lowest since June 15, 2020, at 693.15, and the yearly low.

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