[MarketING] Retail Stocks Hit New Lows Amid Consumer Spending Contraction

KOSPI Closes Higher After Four Days
Institutional Investors Lead Rebound Buying Pressure

The KOSPI closed higher for the first time in four days. A rebound buying spree, mainly led by institutional investors, flowed in following recent declines, resulting in a strong performance. While the index rose for the first time in a while, retail stocks, expected to show poor earnings due to consumption contraction amid recession concerns, recorded new 52-week lows one after another, showing a sluggish trend.

KOSPI Closes Higher for the First Time in Four Days

On the 22nd, the KOSPI closed at 2,593.70, up 11.07 points (0.43%) from the previous day. The KOSDAQ ended the session at 876.38, up 0.68 points (0.08%).

[Image source=Yonhap News]

Institutional investors led the index's rise. On that day, institutions net bought 236.5 billion KRW in the KOSPI market and 45.9 billion KRW in the KOSDAQ market. Foreign investors net sold 125.4 billion KRW in the KOSPI market but purchased 35.7 billion KRW in the KOSDAQ market. Individual investors sold 110.3 billion KRW and 44 billion KRW respectively. Individuals showed a buying preference in the morning, turning the index, which started lower, into an upward trend, but later switched to selling.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "Despite the U.S. stock market falling due to hawkish remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), and semiconductor-centered sales releases, the domestic stock market rose after a rebound buying spree following a decline at the start."

Stocks that attracted buying from institutions and foreigners showed notable strength. On that day, institutions bought the most shares of HYBE, purchasing 37.7 billion KRW worth, followed by POSCO Holdings with 33.3 billion KRW. Supported by this, HYBE rose 3.54% compared to the previous day. During the session, it reached 312,500 KRW, marking a 52-week high. POSCO Holdings also rose 3.53%. Foreign investors heavily bought Samsung Electronics (142.3 billion KRW) and LG Energy Solution (32.1 billion KRW). Samsung Electronics rose 1.13%, and LG Energy Solution increased by 1.97% respectively.

Although the index rose slightly, overall trading showed a subdued pattern. The trading volume fell to the 17 trillion KRW level, the lowest since the 5th of this month. In particular, the KOSPI market trading volume dropped to the 8 trillion KRW level, marking the lowest figure this month.

Retail Stocks Hit New Lows Amid Consumption Contraction

Although the index rose slightly, retail stocks recorded new 52-week lows one after another, showing a sluggish price trend.

On that day, Shinsegae, E-Mart, Lotte Shopping, Lotte Hi-Mart, Hyundai Department Store, and Hanwha Galleria all recorded 52-week lows. Shinsegae closed up 0.33% but fell to 183,200 KRW during the session, setting a new 52-week low. E-Mart, down 0.87%, also hit a new 52-week low at 79,100 KRW during the session. Lotte Shopping (down 0.53%), Lotte Hi-Mart (down 0.93%), Hanwha Galleria (down 0.74%), and Hyundai Department Store (down 0.51%) also declined, recording new 52-week lows during the session.

Due to concerns over an economic recession leading to consumption contraction and base effects, poor earnings are expected, resulting in sluggish stock performance.

According to Hana Securities, retail sales in April increased by 2.6% year-on-year to 42 trillion KRW, showing a slowdown compared to the first quarter. This was due to a high base last year and an overall contraction in consumption. Convenience stores grew by 8.9%, large discount stores by 3.3%, and department stores by 2.5%, with department stores showing the weakest growth rate. The department store slump was mainly due to the high base effect and a slowdown in fashion sales, which had driven growth. May is also estimated to have performed worse than April due to base effects. Hyunjung Seo, a researcher at Hana Securities, said, "May was the month when domestic reopening (resumption of economic activities) was in full swing, and it had the highest base effect from the previous year. The existing store growth rate for department stores in May is estimated to be around -1%, and large discount stores around 0%."

June is expected to see a slight recovery but is unlikely to escape poor earnings. Researcher Seo said, "Sales in June are expected to show a slight recovery compared to April and May, but overall, retail companies' poor earnings are expected to continue into the second quarter following the first quarter. A cautious approach to the retail sector is advisable for the time being."

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