KOSPI Falls Below 2,400... Retail Investors Confused

KOSPI Experiences Repeated Declines and Mild Rebounds Amid June Slump
Some Retail Investors Hesitate Due to Poor Economic Conditions
Many Uncertainties Remain Including Interest Rate Hikes and Export Slowdown

On the afternoon of the 29th, the KOSPI, KOSDAQ, and Seoul foreign exchange market won/dollar trading rates were displayed in the dealing room of the Hana Bank headquarters in Jung-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Kang Wooseok] Recently, as the domestic stock market has been fluctuating between declines and slight rebounds while striving to maintain the 2400 level, individual investors (retail investors) seem to be struggling over the timing of their investments. While some retail investors are entering the market expecting a rebound, others are holding off on investing, citing that the economic situation has not yet improved.

On the 29th, the KOSPI fell more than 1%, slipping below the 2,400 mark again. The KOSPI closed at 2,377.99, down 44.10 points (1.82%) from the previous trading day, marking a decline after four consecutive trading days of gains.

The downward trend in the KOSPI has been clear since the beginning of this month. As of June 23, there were only three days (June 3, June 18, and June 21) when the KOSPI closed higher than the previous day. The magnitude of the decline was also significant. The KOSPI index was 2,685.90 on May 31, the last trading day of May, but it dropped to a yearly low of 2,314.32 on June 23, falling more than 10% in less than a month.

Globally, the sluggishness of the Korean stock market stands out. According to the Korea Exchange and Yonhap Infomax, from the end of last month to June 24, the KOSDAQ and KOSPI recorded the highest and second-highest decline rates among 40 major global stock indices. The KOSDAQ fell 16.01%, from 893.36 at the end of last month to 750.30 on the 24th, while the KOSPI dropped 11.89%, from 2,685.90 to 2,366.60 during the same period.

The main causes of this decline in the Korean stock market are attributed to the global interest rate hikes, including the U.S. Federal Reserve's 'Giant Step' (a 0.75 percentage point increase in the benchmark interest rate), and the slowdown in Korea's exports. In fact, as of the 20th of this month, the trade balance recorded a deficit of $15.469 billion (approximately 20 trillion KRW). According to statistics from the Korea International Trade Association, the largest semiannual trade deficit since 1956 was in the second half of 1996 ($12.55 billion). Given Korea's economy's high dependence on exports, the impact of the trade deficit is considered more severe.

Meanwhile, as the KOSPI has been rising consecutively, some are beginning to quietly expect a market rebound. Since the decline has been significant and most of the negative factors have already been disclosed, it is believed that only upward movement remains.

A 40-year-old office worker, Mr. A, said, "Stocks eventually rise after falling. I have always entered the market aggressively because I think waiting too long means missing the right timing, and I plan to enter even for the short term this time. It feels like the negative factors have been somewhat resolved through pre-reflection."

However, some believe that investing at this point is premature due to the still unfavorable macroeconomic conditions. A 25-year-old university student, Mr. Ji, said, "Macroeconomic indicators like exchange rates and interest rates don't seem favorable for the market, and forced selling due to stock market declines is occurring, so there is enough room for further decline. Even if the market rises, I don't think there will be a dramatic surge like the previous KOSPI 3000."

Another office worker, Mr. Kim (26), also said, "Since the Fed is continuously signaling interest rate hikes, it is true that I hesitate to invest at this point."

On the 23rd, the KOSPI closed at 2,314.32, down 28.49 points (1.22%) from the previous trading day, marking a yearly low. [Image source=Yonhap News]

In reality, both domestic and international economic conditions are still full of uncertainties. The U.S. Federal Reserve has left open the possibility of consecutive 'Giant Steps' in July, and Korea is also expected to take a 'Big Step' (a 0.5 percentage point increase in the benchmark interest rate), so the domestic stock market remains vulnerable to macroeconomic shocks.

Negative factors such as export slowdown and won depreciation have not been fully resolved. On the 24th, Bang Gi-seon, the First Vice Minister of Strategy and Finance, stated, "The trade deficit is expected to widen somewhat." Although the exchange rate has slightly decreased recently, it still remains around 1,291 KRW per dollar (as of the 28th), about 100 KRW higher compared to the beginning of this year.

Downward pressure from short selling is also a concern. According to the Korea Exchange, the average daily short selling amount in the KOSPI market this month (as of the 24th) reached 500.5 billion KRW. Including the KOSDAQ (138.3 billion KRW), the total exceeds 600 billion KRW. Both markets surpassed last month's figures (477.8 billion KRW and 136.6 billion KRW, respectively).

Experts analyze that the economic situation both domestically and internationally is unfavorable. Professor Kim Taegi of Dankook University's Department of Economics said, "There are global concerns about a recession. The domestic stock market has been somewhat undervalued compared to its fundamentals, and recent market-related policies enacted could be seen as risk factors by foreign investors."

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