KOSPI and KOSDAQ Turn Pale in Fear of 'Omicron'... Plunge Over 2%

KOSPI Falls Below 2900... New Annual Low
Declines More Than Chinese and Japanese Markets... Rising Fundamental Anxiety Increased

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] As concerns over the spread of the Omicron variant virus grow, the KOSPI and KOSDAQ indices plunged more than 2%. Although they rose more than 1% in early trading influenced by the U.S. stock market gains, they closed down over 2% due to overlapping worries about the domestic variant virus outbreak.

On the 30th, the KOSPI closed at 2,839.01, down 2.42% (70.31 points) from the previous trading day. On this day, the KOSPI plunged below the 2,900 mark for the first time this year, setting a new yearly low. It started off boldly with a rise of over 1% influenced by the U.S. stock market gains in early trading but soon fell more than 2% due to selling pressure from foreigners and institutions. Since the beginning of the year, the KOSPI's return rate stands at around -3.7%.

On this day, the domestic stock market recorded a sharp decline as news of a drop in industrial production in October combined with concerns over the spread of the Omicron variant virus. Looking at investment trends, individual investors alone bought stocks worth 742.1 billion KRW, while foreigners and institutions sold stocks worth 143.1 billion KRW and 635.1 billion KRW, respectively. Institutions poured out sell orders from early trading, and foreigners began selling spot and futures in the afternoon, expanding the preference for safe assets.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, “Concerns expanded as news came out that a confirmed case entered Ulsan from a country where Omicron has occurred,” adding, “The decline in U.S. after-hours futures and the 1.9% drop in domestic industrial production in October, marking the largest decrease in 18 months compared to the previous month, also burdened the index.” Furthermore, when St?phane Bancel, CEO of U.S. pharmaceutical company Moderna, mentioned that existing vaccines are less effective against Omicron and that it may take several months to develop and mass-produce vaccines for the Omicron variant, the index reacted even more sharply.

In particular, the domestic stock market showed a larger decline compared to other Asian markets due to weak industrial activity indicators. The fact that China's Manufacturing Purchasing Managers' Index (PMI) released on this day recorded 50.1, turning to an upward trend for the first time in three months, further increased downward pressure on the domestic stock market. Kyungmin Lee, a researcher at Daishin Securities, explained, “58.9% of the KOSPI market capitalization consists of cyclical sectors, IT, and automobiles, which are sensitive to bottlenecks, global economy, and trade,” adding, “In a structure vulnerable to prolonged bottlenecks, weak industrial activity indicators and growing doubts about the continuation of 'With Corona' in Korea stimulated anxiety.”

Looking at the top market capitalization stocks, Samsung Electronics and SK Hynix fell by 1.38% and 1.72%, respectively. Although the Philadelphia Semiconductor Index hit an all-time high the previous day, raising expectations for strength in these two stocks, concerns over Omicron led to a decline of over 1% in the afternoon. Following them, NAVER (-1.42%), Kakao (-0.81%), LG Chem (-2.53%), Samsung SDI (-2.96%), Hyundai Motor (-2.49%), and Kia (-1.77%) also fell.

On this day, the KOSDAQ index also closed at 965.63, down 2.69% (26.71 points) from the previous day. The KOSDAQ index started the session at 1,003.04, up 1.08% (10.70 points) from the previous day, showing a rise of over 1%, but ended the session with a sharp decline. Looking at investment trends, individuals and foreigners sold stocks worth 22.2 billion KRW and 99.7 billion KRW, respectively, while institutions alone bought stocks worth 104.2 billion KRW.

Among the top market capitalization stocks, EcoPro BM (3.72%) and Seegene (0.93%) rose, while Celltrion Healthcare (-2.76%), Pearl Abyss (-1.13%), L&F (-2.72%), Kakao Games (-4.09%), Wemade (-3.05%), Celltrion Pharm (-1.88%), and HLB (-3.36%) declined.