Concerns Over US Tapering Grow... KOSPI Declines

KOSDAQ Also Declines... All Top 10 Market Cap Stocks Except Kakao Games Show Weakness

On the 4th, KOSPI opened at 3,246.17, down 1.26 points (0.04%) from the previous trading day, as dealers were working in the Hana Bank dealing room in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Gong Byung-sun] Concerns that the United States may shift its policy through asset purchase tapering are impacting the domestic stock market. The KOSPI is showing a downward trend in early trading.

As of 10:55 a.m. on the 4th, the KOSPI stood at 3,226.73, down 0.64% (20.70 points) from the previous trading day. It even dropped to 3,218.67 at 10:35 a.m. that day.

The highlighted concerns over asset purchase tapering in the U.S. appear to have negatively affected the domestic stock market. On the 2nd (local time), the U.S. Federal Reserve (Fed) announced it would sell corporate bonds and exchange-traded funds (ETFs) it had been purchasing since the COVID-19 pandemic. Although the scale is only $5.21 billion in corporate bonds (approximately 5.8263 trillion KRW) and $8.56 billion in ETFs, it was enough to emphasize the possibility of a policy change by the Fed.

Concerns about liquidity reduction spread further after the employment data release. The May Automatic Data Processing (ADP) private employment report released on the 3rd showed nonfarm employment improved to 978,000, up from 654,000 in April. Employment in service production-related sectors also rose significantly from 563,000 to 850,000. Seo Sang-young, a researcher at Mirae Asset Securities, explained, "As employment data improved, the market worried that the Fed's policy change could accelerate," but added, "Looking at the details, the pace of employment improvement is not fast, which led the U.S. stock market to narrow its losses." In fact, the number of mass layoffs increased from 22,913 in April to 24,586.

Institutions and foreigners are selling off. On this day, institutions and foreigners net sold 574.5 billion KRW and 56.2 billion KRW, respectively. Individuals net bought 595.6 billion KRW.

Many sector indices showed weakness. The telecommunications sector had the largest drop at 1.95%. This was followed by services (-1.56%), transportation and warehousing (-1.13%), distribution (-1.06%), and electrical and electronics (-0.97%). Meanwhile, machinery (2.38%), banking (2.24%), transportation equipment (0.90%), construction (0.82%), steel and metals (0.59%), and electricity and gas (0.47%) rose.

Almost all of the top 10 market capitalization stocks declined. Kakao had the largest drop at 2.37%, followed by NAVER (-1.80%), SK Hynix (-1.55%), Celltrion (-1.13%), Samsung Electronics (-0.97%), LG Chem (-0.86%), Samsung SDI (-0.65%), and Samsung Biologics (-0.12%). Kia (1.38%) and Hyundai Motor (0.63%) rose.

At the same time, the KOSDAQ index stood at 983.72, down 0.65% (6.47 points) from the previous trading day. It also fell to 983.02 at 10:40 a.m.

Foreigners and institutions are also actively selling. Foreigners and institutions net sold 100 billion KRW and 39.7 billion KRW, respectively. Individuals net bought 152.8 billion KRW.

Most sectors showed weakness. The entertainment and culture sector had the largest drop at 2.22%, followed by broadcasting services (-1.95%), semiconductors (-1.62%), telecommunications and broadcasting services (-1.61%), and finance (-1.23%). Sector indices for computer services (1.26%), construction (0.97%), publishing and media reproduction (0.91%), software (0.61%), and transportation equipment and parts (0.13%) rose.

All of the top 10 market capitalization stocks except Kakao Games declined. CJ ENM had the largest drop at 3.09%, followed by Seegene (-2.33%), Alteogen (-1.96%), SK Materials (-1.73%), Celltrion Pharm (-1.54%), Pearl Abyss (-1.03%), Celltrion Healthcare (-1.02%), EcoPro BM (-0.96%), and HLB (-0.30%). Kakao Games alone rose 0.72%.