KOSPI Drops Over 1% Amid Slowing Chinese Economy and Concerns Over US Tech Stocks Earnings

KOSPI and KOSDAQ Indexes Turn Pale Blue

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] The KOSPI and KOSDAQ indices closed sharply lower. Despite the rise in the three major indices of the U.S. New York Stock Exchange, investment sentiment was dampened due to pressure from China's economic slowdown and concerns over the earnings of major U.S. tech stocks.

On the 24th, the KOSPI closed at 2,605.87, down 1.57% (41.51 points) from the previous trading day. The index opened at 2,638.94, down 0.32% (8.44 points) from the previous day, but soon plunged more than 1% by the close. Selling pressure was led by foreigners and institutions, who sold stocks worth 323 billion KRW and 281.3 billion KRW respectively. Individual investors were the sole buyers, purchasing stocks worth 580.8 billion KRW.

First, growing concerns over the earnings of major U.S. tech stocks had a negative impact. After the market closed the previous day, Snap, the parent company of Snapchat, mentioned that its earnings guidance might fall short, causing a sharp drop in after-hours trading. Consequently, major U.S. tech stocks also declined, which dragged down domestic stocks such as NAVER (-4.14%) and Kakao (-2.77%).

Global investment banks (IBs) also influenced the market by revising down China's economic growth forecasts. UBS lowered China's economic growth rate for this year from 4.2% to 3%, and JP Morgan significantly cut its Q2 GDP growth forecast from -1.5% to -5.4%. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The increased selling by foreigners in both spot and futures markets pulled the index down," adding, "Selling pressure emerged in the recently rising electrical and electronics sector due to rumors of a sharp drop in server demand from China, which burdened the index."

By sector, the highest gains were seen in electric and gas utilities (1.72%), textiles and apparel (1.41%), and construction (0.8%). In the electric and gas utilities sector, Korea Electric Power Corporation (KEPCO) stood out with a 3.7% rise. This reflected expectations that KEPCO's financial structure could improve after the Ministry of Trade, Industry and Energy decided to cap the System Marginal Price (SMP) in the electricity market at 1.25 times the 10-year average. KEPCO had recorded large deficits due to soaring fuel costs, but with this measure, even if fuel costs surge, prices will be limited to within 25% above the average price.

At this time, among the top market capitalization stocks, all declined except LG Energy Solution (0.11%). Samsung Electronics (-2.06%), SK Hynix (-3.98%), Samsung SDI (-4.26%), Hyundai Motor (-1.6%), LG Chem (-0.74%), and Kia (-1.07%) continued their downward trend.

The KOSDAQ index showed a steeper decline than the KOSPI, plunging 2.1% (18.25 points) to close at 865.07. The index opened at 881.55, down 0.23% (2.04 points) from the previous day, and continued its downward trend. Regarding investment trends, individual investors were the sole net buyers with purchases worth 190 billion KRW, while foreigners and institutions sold stocks worth 34 billion KRW and 131 billion KRW respectively.

Among the top market capitalization stocks, all declined, including EcoPro BM (-3.61%), L&F (-3.11%), Celltrion Healthcare (-1.87%), HLB (-3.64%), Kakao Games (-1.87%), Pearl Abyss (-1.64%), Celltrion Pharm (-1.91%), Chunbo (-2.5%), and Rino Industries (-3.67%).