KOSPI Continues to Decline... Heightened Caution Amid Sharp Rise in Government Bond Yields

by Hwang Junho

Published 12 Apr.2022 10:39(KST)

On the 12th, as the KOSPI index started slightly lower due to selling pressure from foreigners and institutions, dealers were working in the Hana Bank dealing room in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] On the 12th, the KOSPI opened lower as preference for safe assets increased due to a sharp rise in government bond yields.

The KOSPI started at 2,674.17, down 18.93 points (0.70%). As of 9:37 AM, the KOSPI is recorded at 2,684.04, down 0.34%. Individuals, who had been net buyers for eight consecutive trading days, switched to net selling. Individuals had continuously been net buyers since the 31st of last month. On this day, foreigners are net sellers with 15.4 billion KRW, while institutions are net buyers with 18.7 billion KRW.

Among all stocks, 629 are declining. Among the top market capitalization stocks, Samsung Electronics, the unchanging leader, is extending its losses. Samsung Electronics had fallen for four consecutive trading days since the 5th but rose on the 11th. On this day, Samsung Electronics recorded 67,600 KRW, down 0.44%. SK Hynix, another semiconductor stock, rose 0.9% to 112,500 KRW. By sector, medical precision (1.74%), non-metallic minerals (0.29%), transportation and warehousing (0.25%), and pharmaceuticals (0.17%) are performing well.

The KOSDAQ also opened lower at 914.28, down 7.55 points (0.82%). At this time, the KOSDAQ is recorded at 915.54, down 0.68%. Individuals and foreigners are net buyers with 32.1 billion KRW and 8.6 billion KRW respectively, while institutions are net sellers with 40.1 billion KRW.

Among all stocks, 1,051 are declining. Among the top market capitalization stocks, EcoPro BM, ranked first in market cap, recorded 442,300 KRW, down 3.22%. Kakao Games and Wemade also fell by 3.99% and 4.53%, respectively. By sector, non-metallic (0.98%), computer services (0.52%), and transportation (0.33%) are showing upward trends.

The market decline on this day is analyzed as a result of increased preference for safe assets due to a sharp rise in government bond yields amid the release of economic indicators from the US and other countries and ahead of the Bank of Korea's Monetary Policy Committee meeting on the 14th.

Sangyoung Seo, a researcher at Mirae Asset Securities, said, "After the release of China's inflation indicators, concerns about expanding global inflationary pressures emerged, causing a sharp rise in US government bond yields. This led to selling pressure centered on tech stocks in the US stock market, which burdens the Korean stock market," adding, "Concerns about economic slowdown due to Shanghai lockdowns from COVID-19 in China and ongoing US inflation issues could negatively affect foreign investor demand." China's March Consumer Price Index recorded 1.5% year-on-year, exceeding last month's announced figure (0.9%) and the expected figure (1.3%).

Jiyoung Han, a researcher at Kiwoom Securities, said, "The US Consumer Price Index for March, scheduled to be announced on the 12th (consensus 8.4%, previous month 7.9%), will be a short-term turning point for the stock market," adding, "While the figure itself is expected to be high, attention should be paid to the fact that major raw material prices, including international oil prices, have returned to pre-Ukraine crisis levels since mid-last month, and the Shanghai lockdown measures that caused renewed inflation are likely to end by the end of this month. Therefore, the outlook for inflation peaking in the second quarter of this year remains valid."