Impact of US Stock Market Plunge... KOSPI Falls Over 1%, Won-Dollar Exchange Rate Surpasses 1300 Won

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[Image source=Yonhap News]

[Asia Economy Reporter Son Sun-hee] On the 22nd, the domestic stock market is showing a decline of over 1%. The KOSPI index, which had recently been stagnant within a box range, retreated below the 2430 level on this day.

As of 9:21 a.m., the KOSPI stood at 2,429.77, down 29.19 points (1.19%) from the previous session. This is analyzed as a result of the U.S. stock market's sharp drop of over 2% the day before, due to concerns over additional interest rate hikes by the Federal Reserve (Fed). Additionally, geopolitical risks surrounding the Russia-Ukraine war have intensified, causing U.S. Treasury yields to surge to their highest levels since November last year.

Han Ji-young, a researcher at Kiwoom Securities, said, "While the rally in the stock market in January was mainly driven by 'a decline in market interest rates due to expectations of a Fed rate cut within the year,' the opposite phenomenon of 'rising market interest rates due to reduced expectations of a rate cut within the year' is now causing market corrections." She analyzed, "The Fed's rate cuts are premised on the economy being damaged and entering a recession, but strong U.S. economic indicators released since February have lowered the Fed's willingness to ease tightening."

She added, "More notably, market participants who had supported rate cuts within the year regardless of the final rate level until last week are gradually retreating. It is worth noting that the consensus for the upper limit of rates at the December FOMC is approaching 5.5%." She further stated, "Considering the change in sentiment after economic indicator surprises in January such as employment and inflation, it is judged that the current stock market has re-entered a phase of sensitivity to Fed policy."

Looking at trading trends by investor type, individuals are net buyers with 184.8 billion KRW, while foreigners and institutions are net sellers with 52.9 billion KRW and 134.9 billion KRW respectively.

Among the top 10 market capitalization stocks, all are showing declines of 1-2%. Samsung Electronics is trading at 61,200 KRW, down 1.45% from the previous session, and LG Energy Solution is down 1.92% at 510,000 KRW. SK Hynix (-2.19%) and LG Chem (-2.47%) are also recording declines of over 2%.

The KOSDAQ index is also falling. At the same time, the KOSDAQ is down 7.88 points (-0.99%) to 785.54. By investor type, foreigners and institutions are net sellers of 57.5 billion KRW and 31.1 billion KRW respectively, while individuals are net buyers of 95.8 billion KRW.

Unlike the KOSPI, some stocks in the top 10 market capitalization group of the KOSDAQ are showing gains amid a generally weak market. EcoPro BM, the 'leader' of KOSDAQ, is trading up 1.24% at 162,800 KRW. EcoPro (0.60%) and SM (0.32%) are also on the rise. JYP Entertainment is showing a 3.15% increase.

On the other hand, Celltrion Healthcare (-2.26%), L&F (-2.00%), and HLB (-3.48%) are showing declines.

Meanwhile, in the Seoul foreign exchange market today, the won-dollar exchange rate started at 1,306.2 KRW, up 10.3 KRW from the previous closing price, and is staying in the low 1300 KRW range. This is the highest level in about two months since December 19 last year (1,310.5 KRW) based on the opening price.