[Market Close] Kospi Hits Lowest in 2 Years 1 Month... Falters Due to Inflation and Supply-Demand

KOSPI and KOSDAQ Hit New Year Lows
Caution Ahead of US September CPI Release
Option Expiration Day Sees Foreigners Selling Futures
Shinrajen Hits Upper Limit on Trading Resumption Day

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] The KOSPI slid to the 2160 level on the 13th, marking its lowest point in 2 years and 1 month. The KOSDAQ also dropped about 3%, barely holding the 650 level. Ahead of the U.S. September Consumer Price Index (CPI) announcement scheduled for that night, investor sentiment weakened, and vulnerable supply-demand factors such as options expiration acted as negative factors.

On that day, the KOSPI closed at 2,162.87, down 1.80% (39.60 points) from the previous day, setting a new yearly low. This is the lowest index since September 30, 2020. It started the morning at 2,198.29, down 0.19% (4.18 points), but the decline widened due to foreign selling in the morning session.

The index was largely weighed down by foreign futures selling. On that day, foreigners net sold 1.1792 trillion KRW in the futures market. In the cash market, individuals and foreigners net bought 80.9 billion KRW and 192.4 billion KRW respectively. Institutions net sold 299.9 billion KRW.

Choi Yoo-jun, a researcher at Shinhan Investment Corp., analyzed, "The impact of options expiration, lack of bottom-fishing demand, fragile supply-demand, continued risk aversion, and concentrated attention on financial market stabilization measures influenced the market."

Looking at the top market capitalization stocks, SK Hynix rose 0.96%, Celltrion 0.30%, and Kia 0.15%, closing in positive territory. On the other hand, LG Chem fell 2.71%, Samsung SDI 2.30%, Naver 2.16%, Hyundai Motor 2.08%, and Samsung Electronics 1.08%.

The weakness in growth stocks was prominent ahead of the September CPI release and following the tightening stance confirmed in the previous day’s Federal Open Market Committee (FOMC) minutes. This is because the discount rate increases during rate hike periods. Kakao closed down 5.12% at 47,300 KRW. Kakao Pay and Kakao Bank recorded declines of 4.97% and 6.76%, respectively. According to the FOMC minutes, the majority of Federal Reserve officials agreed that the costs of a passive approach to controlling inflation are higher than those of an excessive response.

[Image source=Yonhap News]

The KOSDAQ closed down 2.99% (20.08 points) at 651.59. It started the day at 669.36, down 0.34% (2.31 points), but during the session, it dropped as much as 3.17% to 650.39.

The KOSDAQ also lost momentum due to selling pressure from foreigners and institutions. Foreigners and institutions sold 41.3 billion KRW and 4.9 billion KRW, respectively. Meanwhile, individuals alone bought 29.8 billion KRW.

Among the top market capitalization stocks, only EcoPro BM (+5.23%), EcoPro (+0.98%), and L&F (+0.62%) rose. All are battery-related stocks. On the other hand, Pearl Abyss fell 10.33%, Kakao Games 5.80%, JYP Entertainment 3.36%, HLB 1.74%, Lino Industrial 1.08%, and Celltrion Healthcare 1.08%. ShillaJen, which resumed trading after 2 years and 5 months, hit the daily limit and closed at 10,850 KRW.

Kim Dae-jun, a researcher at Korea Investment & Securities, evaluated, "The unexpectedly high U.S. Producer Price Index (PPI) and the release of the FOMC minutes rekindled tightening concerns, and the large-scale futures selling by foreigners was also a burden." He added, "Except for secondary battery stocks, the top market capitalization stocks on the KOSDAQ all fell, expanding the index’s decline."