[MarketING] US Tightening Concerns and Delayed Recovery in China's Economy Put 2520 Level at Risk

KOSPI Declines for 5th Day
Foreign and Institutional Selling Pressure Continues

The KOSPI has continued its decline for the fifth consecutive day, putting the 2520 level at risk. While concerns over U.S. tightening still limit gains, the slower-than-expected recovery of the Chinese economy has caused the domestic stock market to remain sluggish. With the U.S. inflation index announcement approaching, the cautious sentiment dominating the market is expected to persist for the time being.

KOSPI Falls for 5th Day... Barely Holding 2520 Level

On the 10th, the KOSPI closed at 2520.70, down 6.01 points (0.24%) from the previous day. The KOSDAQ ended the day at 860.35, down 6.92 points (0.80%). Both the KOSPI and KOSDAQ started higher but fluctuated around the flat line before closing lower.

[Image source=Yonhap News]

Foreign and institutional selling pressure continued to block index gains. On that day, foreigners net sold 155.4 billion KRW in the KOSPI market and 97.4 billion KRW in the KOSDAQ market. Institutions also sold 190.1 billion KRW and 140.8 billion KRW in the two markets, respectively. On the other hand, individuals net bought 312.5 billion KRW and 227.4 billion KRW. Institutions have been selling for five consecutive days in both markets, while foreigners have sold for three consecutive days.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "Both the KOSPI and KOSDAQ showed no clear direction, fluctuating around the flat line before closing lower. The expectation of a U.S. interest rate hike in July limited the index's gains, and profit-taking after earnings announcements from large-cap stocks such as Samsung Electronics and LG Energy Solution also weighed on the market." On that day, Samsung Electronics closed at 69,500 KRW, down 0.57% from the previous day. LG Energy Solution fell 2.14%.

EcoPro seemed poised to join the ranks of "emperor stocks" as it surpassed 1 million KRW intraday but had to settle for a brief appearance after closing lower. EcoPro reached an all-time high of 1,015,000 KRW during the session but failed to maintain the upward momentum and closed down 1.53% at 965,000 KRW.

Slow Chinese Economic Recovery, Will It Accelerate in the Second Half?

China's inflation indicators remain low, indicating a slow pace of economic recovery.

On that day, China's National Bureau of Statistics announced that the June Consumer Price Index (CPI) showed no change compared to the same period last year. This figure is below both the previous month's figure (0.2%) and the forecast (0.2%). China's CPI inflation rate has remained in the 0% range for four consecutive months following March (0.7%), April (0.1%), and May (0.2%).

The Producer Price Index (PPI) for June fell 5.4% year-on-year, continuing a negative trend for six months, and was below both the previous month's figure (-4.6%) and the forecast (-5.0%).

Kim Kyung-hwan, a researcher at Hana Securities, stated, "At the core of the pessimism about China since the second quarter is the sluggishness in household consumption and corporate inventory cycles following the reopening of economic activities. Along with deflation concerns indicated by lower-than-expected inflation, employment, real estate, policy effectiveness, and aftereffects are causes of weak consumption."

While the Chinese economy's recovery is expected to continue in the second half, uncertainties remain regarding the strength of the recovery due to low inflation and other factors. Researcher Kim said, "Consumer sentiment and spending intentions will steadily recover and accelerate in the second half, with China's retail sales growth expected to increase by 8% annually this year. The two-year average growth rate of goods consumption, which moves in tandem with stock prices, is expected to rebound from 2.5-3% in the first half to 4.5-5%. However, limitations and uncertainties regarding the strength of the recovery still exist, so the two-year average retail sales growth rate is likely to remain below this year's nominal growth rate (6-7%)." He added, "The absolute price level remains low this year, which is expected to affect nominal consumption sales and prices. The CPI level is unlikely to exceed the 2% range in the second half."

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