[MarketING] What Changed the Stock Market Sentiment?

KOSPI Rises for Fourth Day, Recovers 2350 Level
Strength Continues on Semiconductor, Supply-Demand, and Policy Effects

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] The KOSPI continued its upward trend for the fourth consecutive day, recovering the 2350 level. The KOSDAQ also regained the 700 mark. The market sentiment has completely changed from the downward trend that persisted around the year-end and New Year period. The revival of the leading semiconductor stocks, improvement in supply and demand including foreign buying, and policy effects are cited as factors that changed the market atmosphere.

KOSPI Rebounds on Large-Cap Stocks, Supply-Demand, and Policy Effects

On the 9th, the KOSPI closed at 2350.19, up 60.22 points (2.63%) from the previous day. The KOSDAQ rose 12.27 points (1.78%) to close at 701.21.

The KOSPI extended its four-day winning streak. After the ex-dividend date at the end of last year, institutional selling pressure caused a continued decline, pushing the index down to the 2210 level, but it has recently succeeded in rebounding.

The KOSPI rebound was led by the semiconductor sector, including the leading stock Samsung Electronics. Samsung Electronics rose for four consecutive days, regaining the 60,000 KRW level. The cumulative increase over the past four days for Samsung Electronics reached 9.57%. The government's semiconductor investment tax support plan provided an opportunity for the rebound, and continuous foreign buying fueled by expectations of supply adjustments at Samsung Electronics sustained the strength. The strength of the leading stock injected warmth into the entire stock market.

Supply and demand conditions also improved. On this day, foreigners net purchased 658.4 billion KRW in the KOSPI market, marking the sixth consecutive day of net buying. Institutions bought 740.9 billion KRW, showing a buying advantage for the second consecutive day. While foreigners continued buying, institutions, previously considered the main cause of the market weakness, turned to buying, adding strength. This is interpreted as the dividend arbitrage selling pressure from financial investment gradually subsiding. Shin Donggil, a researcher at Shinhan Investment Corp., explained, "The selling pressure from financial investment spot sales has significantly weakened," adding, "Year-end financial investment stock net buying aimed at dividend income is around 2 trillion KRW, and institutional stock net selling has been largely exhausted."

Foreigners concentrated their buying on certain sectors, mainly IT and finance. Researcher Noh said, "In the first week of January, foreigners' cumulative net buying in the KOSPI was 1.2 trillion KRW, with net buying in finance and IT sectors at 400 billion KRW and 600 billion KRW respectively, accounting for about 90% of the total net buying." He analyzed, "Looking at the stocks with increased holdings, foreigners mainly net bought Samsung Electronics (500 billion KRW), KB Financial Group (84.9 billion KRW), Hana Financial Group (80.2 billion KRW), Shinhan Financial Group (66.9 billion KRW), KakaoBank (48.4 billion KRW), and SK Hynix (48.3 billion KRW) over the past week."

Policy effects were reflected in the semiconductor and financial sectors favored by foreigners. The semiconductor sector benefited from tax support measures, while the financial sector was influenced by the government's easing of real estate regulations. Kim Daejun, a researcher at Korea Investment & Securities, said, "In terms of current price earnings, sectors benefiting from government policies such as banks and construction, which benefit from real estate regulation easing, as well as hardware, semiconductors, and displays that can enjoy facility investment tax credits, showed strength." He added, "If the direction of U.S. monetary policy and liquidity remains ambiguous, narrowing the focus and responding to the market through the current government's definite fiscal policy will be an effective tactic contributing to improved returns."

Unchanged Fundamentals, Need to Recognize Gap Between Expectations and Reality

Although various expectations have collectively influenced the market flow, opinions suggest caution regarding the gap between expectations and reality since fundamentals have not changed.

Lee Kyungmin, a researcher at Daishin Securities, said, "In the absence of fundamental momentum, it is unlikely that an overreaction based on expectations will lead to a sustained reversal in the stock market trend," adding, "Since the gap between fundamentals and the stock market has widened again, it is inevitable that the gap between expectations and reality will narrow for the time being."

There is also a view that foreign buying momentum cannot be viewed optimistically. Lee said, "It is positive that foreigners, who focused on profit-taking despite the won-dollar exchange rate leveling down since December last year, have turned around," but he pointed out, "If expectations weaken and the Korean won weakens against the dollar, supply and demand could change at any time."