[MarketING] Inflow of Counter Buy Orders VS Reignition of Bank Crisis

The stock market is showing an upward trend for the first time in five days. This is interpreted as a result of rebound buying following the recent continuous decline. However, due to fatigue from the rise, supply and demand instability caused by the recent wave of limit-down incidents, and the KOSPI falling below the 2500 level, concerns about an economic recession persist, and U.S.-originated banking risks have reignited, creating a negative environment for the stock market. It is expected that the adjustment will continue until next month.

As of 10:25 a.m. on the 26th, the KOSPI recorded 2491.05, up 2.03 points (0.08%) from the previous day. The KOSDAQ rose 3.09 points (0.37%) to 841.80. The KOSDAQ initially started higher but turned lower, with the decline widening to nearly 1%, before successfully reversing to an upward trend due to rebound buying.

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While foreign investors and institutions are selling, individual investors are solely buying, driving the index upward. Individuals are net buyers of 91 billion KRW in the KOSPI market and 85.1 billion KRW in the KOSDAQ market.

Although rebound buying has led to strength, the U.S. stock market's weakness due to reignited banking risks and recession concerns is a burden. On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 1.01%, the S&P 500 dropped 1.58%, and the Nasdaq declined 1.98% compared to the previous day.

Banking risks reignited as the deposit balance of First Republic, which has been engulfed in crisis rumors since the Silicon Valley Bank (SVB) bankruptcy, sharply decreased. The previous day, First Republic announced that its deposit balance at the end of Q1 was $104.5 billion, down 40% from the previous quarter. This figure fell significantly short of the expected $145 billion, increasing anxiety. Seonghoon Seo, a researcher at Samsung Securities, analyzed, "First Republic, which disclosed its earnings after market close the previous day, showed poor performance and a larger-than-expected scale of deposit outflows, triggering investor caution. News also emerged that it is considering selling up to $100 billion in securities to secure liquidity, causing First Republic to plunge 49.4% in one day, and surrounding bank stocks also suffered weakness."

Concerns about an economic recession also persisted. The Conference Board Consumer Confidence Index for April recorded 101.3, the lowest since July 2022. The expected figure was 104.0. The index of expectations for the economy over the next six months fell from 74.0 in the previous month to 68.1.

Sangyoung Seo, a researcher at Mirae Asset Securities, analyzed, "Ultimately, with the regional bank issue unresolved, economic indicators shrank due to related issues, highlighting the possibility of a recession. When the First Republic earnings announcement brought the issue back into focus, risk asset preference further contracted."

However, since banking risks and recession concerns were already anticipated negative factors, opinions suggest they are unlikely to change the market trend. Jiyoung Han, a researcher at Kiwoom Securities, said, "The crisis in small and medium-sized banks and recession issues have been largely anticipated and reflected by both the market and policymakers during the Federal Reserve's aggressive tightening process, so the downside threat significant enough to change the market trend is unlikely." However, betting on the index's rise or fall should be avoided for the time being. The researcher added, "With fatigue accumulated from rallies in major countries' stock markets from the beginning of the year to April, and with events such as earnings, the Federal Open Market Committee (FOMC), employment, and inflation data upcoming, it is necessary to refrain from directional bets either upward or downward until the second week of May."

Stocks that caused supply and demand instability in the market due to a wave of limit-down incidents continued to record limit-down prices on this day as well. Seongwang, Samchully, Daesung Holdings, and Seoul Gas recorded limit-down prices for three consecutive days. Sebang and Dow Data showed double-digit declines. Harim Holdings significantly reduced its losses, and Daol Investment & Securities moved within a stable range. The researcher analyzed, "Certain small and medium-sized stocks recording consecutive limit-downs are weakening investor sentiment toward small and medium-sized stocks, and aftershocks are expected to continue to some extent. However, since this is a problem limited to leverage supply and demand issues of specific stocks such as Contract for Difference (CFD) forced sales, its influence on the overall market will decrease over time."

Given the accumulation of risk factors, it is expected that the adjustment phase will continue until May.

Jung-hwan Na, a researcher at NH Investment & Securities, said, "The stock price adjustment does not seem to be limited to just a day or two," adding, "An adjustment is expected throughout May, but on an annual basis, it is considered a short-term correction within an upward trend." He continued, "Domestic corporate earnings are bottoming out but a turnaround has not yet been confirmed, so the stock price may continue to adjust until the earnings turnaround is confirmed."

Strong earnings from U.S. big tech companies are raising expectations for an earnings turnaround. Microsoft (MS) and Google, which announced earnings after market close the previous day, posted first-quarter results exceeding market expectations. MS reported Q1 revenue of $52.086 billion (approximately 69.8994 trillion KRW). Earnings per share were $2.45, surpassing the forecast of $2.23. Alphabet, Google's parent company, announced revenue of $69.079 billion for January to March. Earnings per share were $1.17, exceeding the forecast of $1.07.

Researcher Na said, "Despite concerns about high interest rates and economic slowdown, the earnings surprise by U.S. big tech companies supports the downside of stock prices," and added, "If big tech companies such as Apple and Amazon report strong earnings and provide positive earnings guidance, the possibility of an earnings turnaround will increase."

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