[Good Morning Stock Market] Tesla and Apple Plunge ... KOSPI Expected to Start Slightly Lower

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The US stock market saw Tesla, which was heavily shorted, plunge sharply due to concerns over poor earnings, while Apple (-3.74%) also showed weakness amid slowing iPhone shipments, leading all three major indices to close lower. The Dow Jones 30 fell by -0.03%, Nasdaq by -0.76%, and the Standard & Poor's (S&P) 500 by -0.40%.

Tesla (-12.24%) plunged following the announcement of fourth-quarter deliveries that fell short of market expectations and the downward revision of target prices by major investment firms. In particular, concerns over weakening demand caused major electric vehicle stocks such as Rivian (-5.91%) and Lucid (-9.66%), as well as secondary battery-related stocks like QuantumScape (-4.76%), Lithium Americas (-5.91%), and Rivian (-4.48%), to fall together.

The weakness in the US stock market due to declines in Tesla and Apple is expected to weigh on the Korean stock market. However, considering that these are factors that have already contributed to the decline of related stocks and not new issues, the impact is expected to be limited. Meanwhile, it is also noteworthy that factors which positively influenced the global market at the beginning of the year, such as expectations of a COVID-19 peak-out in China and easing concerns over a European economic recession, were not reflected in the Korean market due to foreign investors' futures selling leading to institutional investors' selling pressure.

Seo Sangyoung, Head of Media Content Division at Mirae Asset Securities: "KOSPI to Start Slightly Lower but Show Solid Performance"

On the 4th, the Korean stock market is expected to show a solid performance supported by positive global market conditions after a slight decline at the start.

On the previous day, the Korean stock market closed with the KOSPI down 0.31%, while the KOSDAQ rose 0.51%. The market opened higher supported by strong European stock markets, but volatility was observed as institutional investors, led by foreign investors' large-scale futures selling, triggered program selling, causing the market to fall more than 2% at one point. In particular, concerns over the spread of COVID-19 due to China's "With Corona" policy also acted as a burden. However, as data suggesting a peak-out of COVID-19 in China was released amid signs of easing US-China tensions, the Chinese stock market turned strong, leading the Korean market to narrow its losses. Additionally, the announcement of an expanded tax credit for the semiconductor sector helped related stocks turn positive, which was also a positive factor.

Meanwhile, the weakness in the US stock market due to declines in Apple and Tesla is expected to weigh on the Korean market. However, since this is not a new issue, the impact is expected to be limited. Furthermore, regarding concerns over slowing production of Apple's main products, positive developments such as Foxconn's factory operating rate rising to 90% are emerging, and Tesla's delivery announcements have already been reflected in the Korean market, which is also positive.

Moreover, it is important to note that factors which positively influenced the global market at the beginning of the year, such as expectations of a COVID-19 peak-out in China and easing concerns over a European economic recession, were not properly reflected in the Korean market due to foreign investors' futures selling leading to institutional investors' selling pressure. Although the recession issue has not been resolved, the possibility of it expanding into a systemic risk that the market fears seems low, so negative issues are expected to be limited.

[Image source=AP Yonhap News]

Han Ji-young, Researcher at Kiwoom Securities: "Tesla-related Negative Factors Already Priced In... Caution on Increased Stock Volatility"

On the previous day, the Korean stock market initially absorbed forced liquidation volumes early in the session and saw net selling by financial investment institutions during the day, resulting in a sharp drop of over 1%, but later rebounded due to perceptions of excessive decline and closed mixed.

On the 4th, the Korean stock market is expected to face downward pressure from the US-originated negative factors such as Tesla's plunge on the New York Stock Exchange and the rise of the offshore won-dollar exchange rate. However, since the Tesla delivery shock has already been priced into the Korean market, the impact on secondary battery and auto parts stocks today is expected to be limited. On the other hand, the sharp drop in oil (-3.8%) and natural gas (-10.4%) prices, which caused energy stocks like ExxonMobil (-3.4%) and Chevron (-3.1%) to plunge in the US market, could weaken investor sentiment toward domestic refining stocks, so it is necessary to prepare for increased stock price volatility accordingly.