[MarketING] KOSDAQ Falls Below 900 Due to Foreign Selling

KOSPI and KOSDAQ Fall in One Day
Foreign Buying Slows Amid Weak Won

The KOSPI and KOSDAQ turned to a downward trend after just one day. The KOSDAQ fell more than 1%, breaking below the 900 level. Foreign investors are pulling the indices down. Recently, as the won-dollar exchange rate has risen, foreign buying momentum has slowed, and the indices seem unable to gain upward momentum. Accordingly, a consolidation phase following the recent short-term rise is expected to continue.

KOSPI Falls Below 2570... KOSDAQ Drops Below 900

As of 10:30 a.m. on the 20th, the KOSPI was at 2564.84, down 10.24 points (0.40%) from the previous day. The KOSDAQ recorded 895.68, down 13.52 points (1.49%).

[Image source=Yonhap News]

The market is showing weakness due to selling by institutions and foreign investors. Institutions net sold 140.5 billion KRW in the KOSPI market and 91 billion KRW in the KOSDAQ market. Foreign investors bought 65.2 billion KRW in the KOSPI market but sold 296.5 billion KRW in the KOSDAQ market. Individual investors bought 69.4 billion KRW in the KOSPI market and 397.6 billion KRW in the KOSDAQ market, standing alone in buying, but it appears insufficient to defend the indices.

Recently, the rising trend of the won-dollar exchange rate seems to be affecting foreign investor demand. While the KOSPI is moving in a slightly weak range with limited losses, the KOSDAQ is falling more than 1%, which is interpreted as due to foreign investors. Foreign investors have continued selling in the KOSDAQ for four consecutive days including today. Seo Sang-young, a researcher at Mirae Asset Securities, said, "The won-dollar exchange rate rose 7.1 won to 1325.7 won yesterday due to dollar strength and the UK Consumer Price Index (CPI) announcement, expanding the won's weakness trend, which is a burden on the domestic stock market," adding, "This can negatively affect foreign investor demand." On the same day, the won-dollar exchange rate opened at 1329.5 won, up 3.8 won, hitting a new high in the Seoul foreign exchange market, and has been moving in the high 1320 won range. This marks the third consecutive day of increase.

The rise in the won-dollar exchange rate appears to be driven by concerns over tightening due to high inflation in the UK. The UK's March CPI recorded 10.1%, slightly down from the previously announced 10.4% year-on-year increase last month. This exceeded the expected 9.8%. Month-on-month, it rose 0.8%, surpassing the forecast of 0.5%.

Although the UK's high inflation has triggered tightening concerns, it is expected to be a short-term effect. Han Ji-young, a researcher at Kiwoom Securities, said, "The rapid rise in the won-dollar exchange rate and US Treasury yields offshore after the domestic market closed was attributed to inflation concerns originating from the UK," adding, "However, the anxiety logic of UK inflation rise → global inflation rise including the US → Federal Reserve (Fed) monetary tightening → dollar strength and interest rate rise is expected to be short-term noise." The Fed's Beige Book report released the previous day evaluated that price pressures in manufacturing and services sectors are easing overall inflation.

One researcher explained, "Officials from the Fed and the European Central Bank (ECB) still create an atmosphere of concern over inflation exceeding the 2% target," but added, "From the market's perspective, it is appropriate to assume that the negative price sensitivity to inflation is entering a phase of decline."

Consolidation Phase Expected to Continue Following Short-Term Rise

Although individual demand is improving, foreign selling is showing signs of slowing, so the consolidation phase following the recent short-term rise is expected to continue.

One researcher said, "The consolidation phase following the short-term rise until last week is expected to continue," adding, "As the won-dollar exchange rate rises and Tesla's earnings results in the US are digested, a differentiated market by sector will be seen."

It is analyzed that the indices are unable to find direction due to the rising won-dollar exchange rate and cautious sentiment regarding earnings. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "The KOSPI is exploring direction in the high 2500 range," adding, "The rising won-dollar exchange rate and cautious sentiment on earnings are factors, along with the slowdown in stock prices of large-cap semiconductor and secondary battery stocks, which account for a significant portion of market capitalization."

The direction of the indices is expected to be determined after the US tech companies' earnings announcements next week. Researcher Choi said, "Most monetary policy variables are considered to have been reflected in the indices, and the direction of the indices may emerge with the US tech companies' earnings announcements, which are the front-end industry of Korean IT," adding, "Judgment on future business conditions and investment plans will be key points. If the indices face downward pressure, attention should be paid to whether the indices can be defended by inflows from individual and foreign investors." Earnings announcements from Google, Microsoft, Amazon, and Intel are scheduled for next week.

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