[Afternoon Market Update] KOSPI and KOSDAQ Fall Over 1%... Investor Sentiment Drops Amid Yuan Weakness

Yuan Weakness Pushes Won-Dollar Near 1400
High Dependence on China Trade... Yuan Synchronization
Breaking 'Po Chi (Breaking Seven)' May Raise Won Weakness Risk
Foreign Investor Sentiment Weakens

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the afternoon of the 16th, both major indices showed signs of weakening. Both the KOSPI and KOSDAQ are experiencing declines in the 1% range. This is despite China's three major economic indicators showing better-than-expected performance, as the yuan continues to weaken. Concerns over the won's depreciation, which is synchronized with the yuan, have also increased, leading to a contraction in investor sentiment.

As of 1:20 PM, the KOSPI is down 1.24% (-29.76 points) at 2372.07.

Although individual investors are expanding their buying volume, it appears insufficient to defend the index. Individuals are net buyers of 439.2 billion KRW at this time. On the other hand, foreigners and institutions are net sellers of 182 billion KRW and 266.3 billion KRW, respectively. However, in the futures market, individuals and foreigners are selling 122.8 billion KRW and 142.4 billion KRW, respectively.

The securities industry identified the exchange rate and Chinese economic indicators as the most important issues influencing the market flow today. The three major Chinese economic indicators released this morning all rose thanks to the Chinese government's strong economic stimulus policies, and the domestic stock market showed some downward rigidity in the morning session.

[Image source=Yonhap News]

However, the yuan's weakness is believed to be having an impact. The dollar index in the foreign exchange market fluctuated around 109 dollars, but the yuan expanded its depreciation, surpassing 7 yuan for the first time since July 2020. Since the Chinese yuan is linked to South Korea's foreign exchange market, if a "Po-chi" (破七, breaking 7 yuan per dollar) occurs, the won exchange rate is also likely to plunge.

Lee Kyung-min, a researcher at Daishin Securities, pointed out, "The won-dollar rate is again approaching 1400 won, and the selling pressure from foreigners in both spot and futures markets is increasing downward pressure on the stock market."

Among the top market capitalization stocks, only the automobile sector is showing an upward trend. Hyundai Motor and Kia are up 1.52% and 1.13%, respectively.

LG Chem is deepening its losses, trading down 3.04% at 638,000 KRW. SK Hynix and Naver also fell 2.17% and 2.00%, respectively, ranking among the top decliners.

Samsung Electronics is trading down 0.36% at 55,800 KRW. During the morning session, it dropped to 55,500 KRW, setting a new 52-week low.

LG Energy Solution, which showed gains in the morning, is trading down 0.39% at 509,000 KRW. Researcher Lee Kyung-min explained, "Large secondary battery stocks such as Samsung SDI and LG Energy Solution, which supported the KOSPI 2380 level in the morning, reversed to a decline in the afternoon and widened their losses, which also acted as a negative factor for the stock market."

As of 1:55 PM, the KOSDAQ is down 1.25% (-9.74 points) at 771.64 compared to the previous day. The KOSDAQ opened down 0.63% (-4.89 points) at 776.49 but has been widening its losses in the afternoon.

The increased selling pressure from foreigners in the afternoon appears to be pulling the index down. Foreigners and institutions are net sellers of 111.5 billion KRW and 37 billion KRW, respectively. Individuals alone are buying 154.1 billion KRW.

Among the top market capitalization stocks, L&F (+0.13%) turned to an upward trend in the afternoon. HLB (+0.24%) saw its gains narrow in the afternoon but maintained an upward trend since the market opened.

SM is trading at 75,800 KRW, up 17.67% (11,300 KRW) from the previous day. After rising more than 10% shortly after the market opened, it has maintained a strong upward trend. This is interpreted as increased investor sentiment due to the partial resolution of governance risks following the announcement of contract termination with Like Planning, a company owned by Lee Soo-man.

EcoPro BM fell 3.09%, Celltrion Healthcare 2.33%, Pearl Abyss 2.17%, and Celltrion Pharm 1.70%, ranking among the largest decliners.