"KOSPI Sobs and Smiles Over Tariffs, Quickly Recovers to 2400 Level"

The KOSPI is experiencing a rollercoaster ride due to tariff risks originating from the United States. After falling below the 2300 mark for the first time in 1 year and 5 months the previous day, the KOSPI rebounded in just one day and quickly recovered above the 2400 level. This was influenced by U.S. President Donald Trump’s decision to suspend reciprocal tariffs by country for 90 days, which caused a sharp rise in the U.S. stock market.

Yonhap News

원본보기 아이콘

As of 9:30 a.m. on the 10th, the KOSPI was trading at 2407.81, up 114.11 points (4.97%) from the previous day. The KOSDAQ was at 671.22, up 27.83 points (4.33%).

With the stock market surging rapidly, a buy-sidecar (program trading buy order suspension) was triggered. According to the Korea Exchange, at 9:06 a.m., the KOSPI200 futures (nearest month) rose 5.76% from the previous closing price of 304.65 points to 322.20 points and sustained this for one minute, triggering the buy-sidecar. This was the first time in about eight months since August 6 of last year that a KOSPI buy-sidecar was activated. Earlier, on the 7th, a sell-sidecar was triggered due to a sharp decline. The KOSPI sidecar is activated when the KOSPI200 futures price rises more than 5% above the reference price and sustains for one minute, suspending the effectiveness of program buy orders for five minutes.

The exchange rate is also quickly stabilizing. In the Seoul foreign exchange market on this day, the won-dollar exchange rate started at 1446 won, down 38.1 won from the previous session. The previous day, it closed at 1484.1 won, marking the highest level in over 16 years since the financial crisis.

Following the tariff suspension, the New York stock market surged the previous day with the Dow Jones Industrial Average rising 7.87%, the S&P 500 Index up 9.52%, and the Nasdaq Index jumping 12.16%. The Dow recorded its largest increase in 4 years and 11 months, while the S&P 500 and Nasdaq posted their biggest gains in 17 and 24 years, respectively.

Seonghoon Lee, a researcher at Kiwoom Securities, said, "Due to the 90-day suspension of reciprocal tariffs by President Trump, the sharp rise in the U.S. stock market, and the rapid drop in the won-dollar exchange rate, sectors affected by tariffs, including semiconductors, are expected to show a strong upward trend."

On this day, Samsung Electronics rose over 5%, and SK Hynix climbed more than 11%. Hyundai Motor and Kia also recorded gains exceeding 7% and 5%, respectively.

Attention is also focused on whether foreign investors, who had been continuously selling and leading the domestic market decline, will return. Researcher Lee said, "Considering that the KOSPI’s 12-month forward price-to-book ratio (PBR) fell to 0.79 due to the recent sharp drop caused by the reciprocal tariff issue, there is sufficient room for entry into the domestic market. Therefore, it is necessary to pay attention to whether large-scale capital inflows from foreign investors, who had shown a net selling trend of about 8 trillion won since April, will take place."

Although the shock has somewhat subsided, since tariff risks have not been completely resolved, it will be necessary to monitor future negotiation trends. Ji-won Kim, a researcher at KB Securities, said, "With China releasing a trade white paper while keeping the possibility of negotiations open, whether negotiations between the two countries will take place will be a variable that determines future trends. The intensification of U.S.-China conflicts and the increased inflation burden are factors that need to be considered."

Yeon-ju Jo, a researcher at NH Investment & Securities, also analyzed, "Although policy uncertainty remains after the 90 days, since U.S. Treasury Secretary Scott Baesent is leading the trade negotiations, it is expected that the process will aim to minimize recession and asset market shocks, confirming a downside support level. However, the tit-for-tat trade war between the U.S. and China is still proceeding strongly, and a decrease in global trade volume and inflation due to the 10% general tariff and 25% automobile tariff is inevitable."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.