Foreign and Institutional Large Sell-Offs Cause Domestic Stock Market to Drop 2%... KOSPI at 2410 Level

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] On the 1st, the domestic stock market fell more than 2% as foreigners and institutions dumped large volumes. Concerns over economic slowdown expanded as the trade deficit for August recorded $9.47 billion.

On that day, the KOSPI index closed at 2,415.61, down 56.44 points (2.28%) from the previous day. It was the first time since July 26 that the closing price was below the 2,410 level. The index fell to the 2,420 level during the session, then showed an upward trend but widened the decline in the latter part. Individuals net bought over 1 trillion won for the first time since June 10, purchasing about 1.162 trillion won worth. Foreigners and institutions net sold 358.5 billion won and 833.6 billion won respectively.

By sector, all sectors recorded weakness. Machinery (-3.79%), Medical Precision (-3.75%), Textile & Apparel (-3.71%), Construction (-3.64%), and Finance (-2.85%) fell in order. Telecommunications (-0.83%), Food & Beverage (-1.40%), and Insurance (-1.50%) showed the smallest declines.

Among the top market capitalization stocks, LG Energy Solution (0.11%) was the only one to rise after news broke that the first U.S. battery plant jointly established with General Motors (GM) started production. Samsung SDI fell more than 3%, recording the largest drop. It was followed by SK Hynix (-2.91%), Kakao (-2.72%), Samsung Electronics (-2.18%), Naver (NAVER) (-1.67%), LG Chem (-1.42%), Samsung Biologics (-1.08%), Kia (-0.74%), and Hyundai Motor (-0.26%).

The KOSDAQ index closed at 788.32, down 18.72 points (2.32%) from the previous day. The index started at 800.74, down 6.30 points (0.78%), widened the decline but briefly recovered the 800 level. However, it then showed a downward trend and closed near the 780 level. Foreigners and institutions sold about 136.8 billion won and 136.1 billion won respectively, leading the index decline, while individuals alone net bought about 260.1 billion won.

Among the top market capitalization stocks, except for HLB which remained flat, most fell. Kakao Games, which faced news that users of the mobile game 'Uma Musume Pretty Derby' are considering refund lawsuits, dropped 5.11%. Alteogen (-5.02%), EcoPro BM (-4.99%), Pearl Abyss (-4.75%), L&F (-4.60%), Celltrion Pharm (-3.32%), Studio Dragon (-3.03%), Celltrion Healthcare (-2.50%), and EcoPro (-2.35%) followed.

Lee Kyung-min, a researcher at Daishin Securities, said, "South Korea's August trade deficit recorded $9.47 billion, expanding pressure on the won's depreciation."

Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "South Korea's trade balance recorded a deficit for five consecutive months in August, and semiconductor exports, which account for more than 20% of domestic exports, turned negative for the first time in 26 months, expanding concerns over semiconductor and domestic economic slowdown, causing Samsung Electronics and SK Hynix to plunge over 2%."

He added, "Due to concerns over economic slowdown and the U.S.-China dispute, safe-haven asset preference expanded, resulting in a stronger dollar and increased selling pressure from foreigners in spot and futures markets." Earlier, the U.S. Biden administration notified American semiconductor companies Nvidia and AMD to halt exports of cutting-edge AI semiconductors to China.

According to the 'August Export-Import Trends' announced by the Ministry of Trade, Industry and Energy on that day, exports last month were $56.67 billion, and imports were $66.15 billion. The trade balance showed a deficit of $9.47 billion. The trade deficit continued for five consecutive months since April, marking the first time in about 14 years for such a streak.

On that day, the won-dollar exchange rate closed at 1,354.9 won per dollar, up 17.3 won from the previous day's closing price. It was the highest closing rate in 13 years and 4 months since April 28, 2009, when it was 1,356.80 won. The widening trade deficit increases dollar demand and raises concerns over economic growth slowdown due to sluggish exports.

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