KOSPI Accompanies Exports, Slowdown Intensifies "Storm Alert for Declining Sectors, Take Shelter"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The slowdown in South Korea's exports has officially begun, and the stock market is expected to face downward pressure. The export growth rate is recognized as a leading indicator of global demand and tends to move in tandem with the KOSPI index trend. This is why there is a flood of forecasts that a highly volatile market is inevitable for the time being due to the deteriorating export environment in the second half of the year.

According to the financial investment industry on the 5th, the export environment in the second half of the year is expected to be challenging, prompting investment advice to review sectors with decreasing and increasing exports. South Korea's exports in June grew by 5.4% year-on-year, significantly slowing from last month's 21.3%. Imports increased by 19.4%, resulting in a trade deficit for three consecutive months (-2.47 billion USD). This is the first time since February 2021 that South Korea's export growth rate has recorded a single-digit increase. It is also the first time since the second half of 2008 that the trade balance has shown a deficit for three consecutive months.

Jeon Gyu-yeon, a researcher at Hana Securities, pointed out, "Global trade volume is decreasing, causing sluggish goods exports, and South Korea's exports are expected to gradually slow down in the second half of the year." He added, "Recently, the Purchasing Managers' Index (PMI) for manufacturing in major countries such as the U.S., Eurozone, and the U.K. has simultaneously weakened, and the sentiment of domestic manufacturing export companies has been declining since July 2021."

The securities industry expects the KOSPI to face strong downward pressure in the second half of the year due to this trend. The KOSPI fell sharply by 21.66% in the first half of this year compared to the end of last year (2977.65) due to foreign investors' selling pressure. This selling pressure was ignited by concerns over export slowdown. Since the Korean economy heavily depends on export manufacturing, it is sensitive to external economic conditions. The export environment has deteriorated amid simultaneous adverse factors such as raw material supply chain disruptions, high inflation, high interest rates, and high exchange rates. In particular, the export growth rate of semiconductors, which account for about 21% of total exports, has declined for three consecutive months, negatively impacting the stock market. Samsung Electronics is the stock most sold by foreign investors in the domestic market since the beginning of the year until the day before, with net sales of 9.2917 trillion KRW during this period.

Ahn Young-jin, a researcher at SK Securities, noted, "It is too early to discuss the bottom of the KOSPI now because when converting the total export amount path into a growth rate, there seems to be room for further downside." He continued, "In reality, stock indices should consider not only these macro factors but also the profits and supply-demand of listed companies, but even those appear challenging. As long as issues such as war, oil prices, and raw material supply continue, and many forecasts indicate weakening external demand, the trade deficit is expected to persist for the time being."

Caution is required in sector investment strategies. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "Since the Korean economy is export-driven, stock prices inevitably move according to export results, which will cause considerable concern from a market perspective." He advised, "Just as you take shelter when a sudden shower pours, it is necessary to temporarily step back from industries with unfavorable export prospects." The sector requiring caution is semiconductors. He pointed out, "It has been confirmed that semiconductor export contracts have worsened compared to the previous quarter," meaning "exports may have an unfavorable impact on semiconductor industry sales." Export contracts refer to the part where actual effectiveness occurs, not just inquiries about goods contracts, so they have a greater influence on stock price trends. On the other hand, industries expected to secure contracts well may show stable trends in stock prices. Currently, such sectors include shipbuilding, home appliances, and chemicals.

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