[Asia Economy Reporter Lee Jung-yoon] The KOSPI index plunged below the 2300 mark as foreign and institutional investors continued to sell amid concerns over an economic recession and a strong dollar. It is the first time in 1 year and 8 months that the KOSPI index closed below 2300.
On the 6th, the KOSPI index closed at 2292.01, down 49.77 points (2.13%) from the previous trading day. The index opened at 2330.11, down 11.67 points (0.50%) from the previous day. After fluctuating throughout the day, it fell below 2300 around 2:06 p.m., then slightly rose, but the selling pressure from foreign and institutional investors widened the decline. Foreign and institutional investors sold a net amount worth approximately 314.8 billion KRW and 622.9 billion KRW respectively, while individual investors bought about 896.3 billion KRW, preventing further index decline.
Based on the closing price, the KOSPI index closed below 2300 for the first time since October 30, 2020, when it recorded 2267.15. The previous day, the index rose 41.44 points (1.80%) to 2341.78 due to buying by foreign and institutional investors, marking a rise after five trading days, but it gave up all gains on this day.
Among the top market capitalization stocks, Kia and Hyundai Motor recorded the largest declines, falling 3.83% and 2.82% respectively. They were followed by Samsung SDI (-2.61%), Samsung Electronics (-1.40%), LG Chem (-1.17%), Samsung Biologics (-0.62%), and SK Hynix (-0.43%). On the other hand, LG Energy Solution rose 2.49% after news emerged that it would supply batteries to Japan's Isuzu Motors in a deal worth about 1 trillion KRW. Kakao (2.08%) and Naver (NAVER) (0.21%) also showed gains.
By sector, medical precision equipment rose 0.27%, the only sector to show strength. Insurance fell more than 6%, showing the largest decline. This was followed by transportation equipment (-4.67%), electric and gas utilities (-4.39%), steel and metals (-4.37%), machinery (-4.34%), distribution (-4.33%), construction (-3.75%), finance (-3.65%), and securities (-3.26%).
Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Concerns over an economic recession and the continued strength of the dollar have led to noticeable withdrawals by foreign and institutional investors. Although foreign funds briefly flowed in yesterday, today's outflow suggests a strong desire to move from emerging markets to dollar-based markets."
Lee Kyung-min, a researcher at Daishin Securities, said, "The won-dollar exchange rate rose to 1310 won early in the session, increasing volatility in foreign demand and adding downward pressure on the KOSPI." In the Seoul foreign exchange market that day, the won-dollar exchange rate closed at 1,306.3 won per dollar, up 6.0 won from the previous day's close. It even rose to 1,311.0 won during the session, the highest level since July 13, 2009.
Additionally, it is analyzed that the inversion of the US short- and long-term Treasury yields on the 5th (local time) also had an impact. In the New York bond market, the US 2-year Treasury yield briefly surpassed the 10-year Treasury yield, with the 2-year yield at 2.792% and the 10-year yield at 2.789%. The inversion, where the short-term 2-year yield is higher than the benchmark long-term 10-year yield, is generally considered a precursor to a recession.
The KOSDAQ index also closed lower that day, falling 6.32 points (0.84%) to 744.63. Individual and institutional investors bought net amounts of 60.3 billion KRW and 2.9 billion KRW respectively, but foreign investors sold about 46.5 billion KRW net.
Among the top market capitalization stocks, EcoPro BM fell the most, down 4.49%. It was followed by Cheonbo (-2.92%), HLB (-2.72%), Studio Dragon (-1.76%), L&F (-0.33%), and Pearl Abyss (-0.19%). Celltrion Healthcare (1.54%), Kakao Games (0.30%), and Celltrion Pharm (0.24%) rose. Alteogen remained flat.
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