'Zero Interest Rate' Ends, Domestic Stock Market Wobbles

KOSPI Shows a Decline of Around 0.70%... KOSDAQ Also Turns Downward
Foreigners Sell Off... Individual Investors Step in to Buy at Lower Prices

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] The domestic stock market is staggering due to the interest rate hike. The KOSPI widened its losses, and the KOSDAQ, which had been rising in the early session, turned to a decline. Nevertheless, individual investors engaged in bargain hunting.

As of 10:55 a.m. on the 25th, the KOSPI recorded 2,973.26, down 0.70% (21.03 points) from the previous day. The KOSPI started the day higher but soon turned downward and widened its losses.

The interest rate hike acted as a negative factor. On this day, the Bank of Korea's Monetary Policy Committee (MPC) raised the base interest rate from 0.75% to 1%. This marked the end of the zero interest rate era, which played a significant role in pumping money into the market, after 20 months. Additionally, the MPC expressed concerns about inflation in its monetary policy direction statement, stating, "Inflation is expected to exceed the target level for a considerable period."

Ahn Ye-ha, a researcher at Kiwoom Securities, explained, "Since the interest rate hike in August, the Bank of Korea has sent hawkish signals," adding, "It is expected that interest rates will be raised consecutively again in January next year." Hawkish refers to a tendency to support tightening, such as raising the base interest rate when signs of economic overheating appear.

Accordingly, foreigners and institutions sold stocks, while individual investors engaged in bargain buying. Foreigners and institutions net sold 93.8 billion KRW and 149.8 billion KRW, respectively. In contrast, individuals net bought 235.3 billion KRW.

Most sectors declined. The electronics sector had the largest drop at 1.45%. This was followed by distribution (-1.40%), textiles and apparel (-1.30%), insurance (-1.22%), paper and wood (-1.15%), and steel and metals (-1.00%). On the upside were banks (1.01%), non-metallic minerals (0.86%), medical precision (0.62%), services (0.12%), and securities (0.11%).

Many of the top 10 market capitalization stocks showed weakness. Samsung SDI had the largest decline at 1.92%, followed by SK Hynix (-1.67%), Samsung Electronics (-1.47%), LG Chem (-0.80%), Kia (-0.72%), and Hyundai Motor (-0.24%). Kakao Bank (1.55%), Kakao (1.20%), NAVER (0.63%), and Samsung Biologics (0.12%) rose.

The KOSDAQ also showed weakness due to the interest rate hike. At the same time, the KOSDAQ recorded 1,017.42, down 0.27% (2.71 points) from the previous day. It was strong in the early session, rising to 1,025.90 at 9:07 a.m., but turned downward after the interest rate hike news.

Foreigners' selling pressure was strong. Foreigners net sold 82.1 billion KRW. Individuals and institutions net bought 67.8 billion KRW and 22.5 billion KRW, respectively.

Almost all sectors declined. Broadcasting services had the largest drop at 5.26%, followed by telecommunications and broadcasting services (-4.01%), semiconductors (-1.64%), computer services (-1.09%), and transportation equipment and parts (-0.92%). On the upside were digital content (1.73%), textiles and apparel (1.22%), telecommunications equipment (0.92%), IT software & services (0.69%), and entertainment and culture (0.47%).

Many of the top 10 market capitalization stocks showed weakness. HL Biotech had the largest decline at 2.72%, followed by Wemade (-2.53%), EcoPro BM (-1.48%), L&F (-1.37%), SK Materials (-0.80%), and Celltrion Healthcare (-0.47%). Kakao Games (4.67%), Pearl Abyss (2.51%), Celltrion Pharm (0.41%), and Chunbo (0.23%) rose.