KOSPI Falls Below 3000 Intraday... Disappointment in Powell

KOSPI Falls Below 3000 During Session
Disappointment Over Remarks by US Fed Chair
Experts Urge Careful Review of Issues

On the 5th, dealers are working in the dealing room of Hana Bank in Euljiro, Seoul. On this day, the KOSPI index opened at 3,036.16, down 7.33 points (0.24%) from the previous trading day, showing a downward trend. The won-dollar exchange rate opened at 1,132.0 won, up 6.9 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] On the 5th, the KOSPI started off with difficulty. It opened at 3036.16, down 0.24% from the previous day, but fell below the 3000 mark within about a minute (at 9:10 AM). Comments on the economy by the Chair of the Federal Reserve (Fed), the U.S. central bank, the day before appear to have caused a cold wave in the Korean stock market following the U.S. stock market.

KOSPI Falls Below 3000

As of 9:18 AM that day, the KOSPI was at 2997.96, down 1.5% (45.53 points) from the previous closing price. Individual investors were net buyers with 352.1 billion KRW, but institutions sold 196.1 billion KRW and foreigners sold 158.7 billion KRW.

By sector, insurance, banking, paper and wood, and financial industries showed upward trends, but other sectors were on the decline. Among the top 10 stocks by market capitalization, only LG Chem was rising, while Samsung Electronics and the rest were showing downward trends.

The plunge in the U.S. stock market the day before, triggered by Chair Jerome Powell's remarks, seems to have affected the Korean stock market as well.

Chair Powell participated in a conference hosted by the U.S. economic media outlet The Wall Street Journal and said regarding the U.S. 10-year Treasury yield, which had surged to the 1.6% range last week, that it was "noteworthy" and that "asset purchases will continue at the current level until we make significant progress toward our goals." He also emphasized, "There is inflationary pressure, but it is temporary. We will be patient."

These remarks were interpreted as the Fed tolerating recent inflation. Accordingly, the U.S. 10-year Treasury yield quickly rose to the 1.54% range. Meanwhile, downward pressure increased on the U.S. stock market, leading to a sharp decline.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 1.11%, the Standard & Poor's (S&P) 500 index dropped 1.34%, and the Nasdaq index closed sharply down by 2.11%.

KOSDAQ Also Wobbles

In the wake of this, the KOSDAQ also started the session in the red. It opened at 923.32, down 2.88 points (0.31%) from the previous day, but the decline soon widened to 1.5%. As of 9:18 AM, it was at 912.32. On the KOSDAQ, individual investors showed a net selling intention of 54 billion KRW, while foreigners and institutions showed net selling intentions of 31 billion KRW and 24.7 billion KRW, respectively.

Among sectors, telecommunications equipment showed an increase of over 1%. Broadcasting services, telecommunications broadcasting, and transportation also showed upward trends. All of the top 10 stocks by market capitalization were pointing downward.

Lee Kyung-min, a strategic researcher at Daishin Securities, diagnosed, "In the short term, caution is needed, but strategically, the opportunity to increase weighting is approaching." He added, "Looking at the stock market trend, the global stock market that was trapped is breaking through the bottom. The Nasdaq had already dropped two days ago, and yesterday it even experienced a level down. Our stock market held up well until yesterday, but we are watching to see if it can hold up today as well."

Han Dae-hoon, a strategic researcher at SK Securities, said, "Chair Powell's attempt to soothe the market has failed again," and predicted, "The phase of increased volatility will continue for the time being." He added, "We are entering a point where sector and stock selection become important. Among cyclical stocks, it is becoming important to make differentiated choices for sectors and stocks supported by earnings."

Ahn Jae-gyun, a researcher at Korea Investment & Securities, said, "Following Chair Powell's remarks the day before, interest rates rose further and the stock market's decline widened, suggesting that Fed monitoring may be strengthened." He forecasted, "It seems effective to confirm issues sufficiently until the Federal Open Market Committee (FOMC) meeting on the 18th and then explore opportunities for bargain buying."

Meanwhile, the won-dollar exchange rate started the session at 1131.20 won, up 0.54% from the previous day.