[Market Close] Will the Bank of Korea Take a 'Big Step'... Foreigners and Institutions 'Sell Off,' 2400 Level Collapses

KOSPI Falls Below 2400
Foreign and Institutional Investors Sell in Tandem
Foreigners Sell Spot and Futures
Risk Asset Aversion Grows
US Consumer Sentiment Index Drops...Recession Concerns Resurface
June Domestic Expected Inflation 3.9%...Highest in 10 Years 2 Months
Bank of Korea 'Big Step' Probability Rises

[Asia Economy Reporter Hwang Yoon-joo] On the 29th, both the KOSPI and KOSDAQ closed lower. This was due to foreign and institutional investors pouring out sell orders amid a sharp drop in the U.S. stock market caused by renewed concerns over a U.S. economic recession and the increased likelihood of the Bank of Korea raising the base interest rate in July. The KOSPI fell below the 2400 level again.

On that day, the KOSPI closed at 2377.99, down 1.82% (44.10 points) from the previous day. The KOSPI opened down 1.44% (34.99 points) at 2387.10 and widened its losses from the morning session.

[Image source=Yonhap News]

◆ Increased possibility of a 'big step'... Investment sentiment weakens, leading to sell-offs = Following the sharp drop in the U.S. stock market the previous day, downward pressure was expected, and the Bank of Korea's June Consumer Sentiment Survey released in the morning also appeared to affect investor sentiment. The one-year expected inflation rate for June surged 0.6 percentage points to 3.9% from 3.3% in the previous month. This is the largest increase since the survey began in July 2008. As a result, the atmosphere grew stronger that the Bank of Korea is likely to choose a 'big step' (raising interest rates by 50 basis points at once) at the July Monetary Policy Committee meeting.

The market reacted immediately. Foreign investors initially showed buying in the futures market right after the opening but soon switched to selling. In the spot market, foreign and institutional investors jointly sold off, pulling the index down.

On that day, foreign and institutional investors net sold 232.7 billion KRW and 504.6 billion KRW respectively, while individual investors alone net bought 694.1 billion KRW. Foreign investors also sold 100.3 billion KRW worth in the futures market.

[Image source=Yonhap News]

◆ Hyundai Kia Motors raided in Germany... LG Energy Solution faces individual corporate setbacks due to investment withdrawal = The top 10 stocks by market capitalization also struggled, affecting the overall KOSPI. LG Chem (-7.02%) had the largest decline, followed by Kia (-6.11%) and Hyundai Motor (-5.65%). The news of the raid in Germany impacted stock prices. LG Energy Solution (-4.63%) also plunged sharply due to the withdrawal of U.S. investment.

Sector-wise, transportation equipment (-3.55), medical precision (-2.58), steel and metals (-2.55), electrical and electronics (-2.31), finance (-2.06), and manufacturing (-2.02) all closed lower.

Lee Kyung-min, a researcher at Daishin Securities, explained, "Amid heightened short-term profit-taking sentiment following a recent technical rebound, concerns over an economic recession emerged due to weak U.S. consumer sentiment indicators the previous day. The possibility of a big step by the Bank of Korea and individual issues with Hyundai Motor and LG Energy Solution increased volatility, acting as factors for the KOSPI's decline."

◆ Battery stocks plunge... IT components sector posts the largest decline = The KOSDAQ closed at 762.35, down 0.93% (7.16 points). The KOSDAQ opened down 1.34% (10.30 points) at 759.21 but narrowed its losses by the close. Individual and institutional investors net sold 156.6 billion KRW and 130.0 billion KRW respectively, while individual investors alone net bought 289.8 billion KRW.

Among the top 10 stocks by market capitalization, only Celltrion Pharm maintained a flat close. Due to the impact of LG Energy Solution's investment withdrawal, L&F (-7.20%) and EcoPro BM (-5.08%) had the largest declines.

The sector with the largest decline was IT components (-3.02%), followed by paper/wood (-2.90%), general electrical and electronics (-2.70%), and IT hardware (-1.68%).