The End of the 'Zero Interest Rate' Era... Domestic Stock Market 'Staggering'

KOSPI Closes Near 2980 Amid Foreign and Institutional Selling Pressure
Kakao Group Stocks Rise on Kakao Pay's Inclusion in KOSPI 200

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] As the era of 'zero interest rates' came to an end, the domestic stock market shook. The KOSPI fell to the 2980 level due to selling pressure from foreigners and institutions. However, Kakao group stocks showed strength, buoyed by the news of Kakao Pay's inclusion in the KOSPI 200.

On the 25th, the KOSPI closed at 2980.27, down 0.47% (14.02 points) from the previous day. It even dropped to 2973.24 at 10:55 a.m. that day.

The interest rate hike is interpreted as having dealt a blow to the domestic stock market. On the 25th, the Bank of Korea's Monetary Policy Committee announced a 0.25 percentage point increase in the base rate from 0.75% to 1.00%. This marked the end of the 'zero interest rate' era after 20 months since March last year, when COVID-19 began to spread.

However, the securities industry evaluates that it will not affect the domestic stock market in the mid to long term. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "The interest rate hike was already anticipated," adding, "The Monetary Policy Committee's maintenance of this year's GDP growth rate at 4% indicates a stable economic recovery."

In the KOSPI market, foreigners and institutions showed strong selling pressure. Foreigners and institutions net sold 92.7 billion KRW and 149.6 billion KRW, respectively. On the other hand, individuals net bought 202.6 billion KRW.

Most sectors declined. The textile and apparel sector had the largest drop at 2.44%. This was followed by electrical and electronics (-1.45%), insurance (-1.36%), paper and wood (-1.34%), distribution (-1.32%), and transportation and warehousing (-1.12%). On the upside were non-metallic minerals (3.70%), banking (3.57%), medical precision (1.62%), finance (1.32%), and services (0.16%).

Although many of the top 10 market capitalization stocks showed weakness, Kakao group stocks showed strength. The rise in stock prices is attributed to the news that Kakao Pay is scheduled to be included in the KOSPI 200. Samsung SDI had the largest decline at 2.05%, followed by SK Hynix (-1.67%), Samsung Electronics (-1.47%), Kia (-1.20%), LG Chem (-1.07%), Hyundai Motor (-0.94%), and Samsung Biologics (-0.24%). Kakao Bank (4.95%), Kakao (2.81%), and NAVER (0.51%) rose.

The KOSDAQ closed at 1015.66, down 0.44% (4.47 points) from the previous day. Although it showed an upward trend early in the session, it turned downward at 10:12 a.m. and showed mixed movements.

Foreigners showed strong selling pressure, net selling 92.6 billion KRW. Individuals and institutions net bought 77.3 billion KRW and 38.9 billion KRW, respectively.

Almost all sectors declined. Broadcasting services had the largest drop at 5.28%, followed by telecommunications and broadcasting services (-3.81%), semiconductors (-1.63%), non-metallic (-1.62%), and internet (-1.30%). On the upside were telecommunications equipment (0.92%), telecommunications services (0.79%), pharmaceuticals (0.76%), entertainment and culture (0.46%), and medical and precision instruments (0.25%).

Many of the top 10 market capitalization stocks showed weakness. Wemade's decline was the largest at 7.34%. Following the Constitutional Court's ruling that the 2017 government cryptocurrency regulations are not subject to constitutional review, investors who had flocked recently due to the association with non-fungible tokens (NFTs) appear to be realizing profits. This was followed by L&F (-2.74%), EcoPro BM (-1.98%), Pearl Abyss (-1.75%), Celltrion Healthcare (-0.94%), and Cheonbo (-0.57%). Kakao Games (4.98%), SK Materials (0.73%), Celltrion Pharm (0.16%), and HLB (0.13%) rose.