[MarketING] US-China Inflation Temperature Gap Leaves Stock Market Nowhere to Lean On

KOSPI Falls for Two Consecutive Days
US Faces Tightening Concerns Amid Inflationary Pressure
China Delays Reopening Due to Deflation

[Image source=Yonhap News]

The KOSPI fell for the second consecutive day, breaking below the 2420 level. Concerns over prolonged U.S. tightening are weighing on the index, while the effect of China's reopening (resumption of economic activities) has been delayed, making it difficult for the stock market to gain momentum. For the time being, the market is expected to remain cautious, closely watching U.S. economic data releases.

KOSPI Falls for Two Consecutive Days... Slips to 2410 Level

On the 9th, the KOSPI closed at 2419.09, down 12.82 points (0.53%) from the previous day. The KOSDAQ ended the session at 809.22, down 4.73 points (0.58%).

Amid ongoing concerns over U.S. tightening, volatility increased due to the simultaneous expiration of futures and options contracts that occur every three months, resulting in a sluggish index performance. Foreign investors sold off 973.1 billion KRW, dragging the KOSPI down. Although individual and institutional investors bought 359.6 billion KRW and 580.8 billion KRW respectively, it was insufficient to defend the index.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "The domestic stock market started higher but turned bearish as volatility increased due to the options expiration day. In particular, investment sentiment in secondary battery stocks, which had been strong recently, weakened following news that U.S. authorities have launched an investigation into Tesla Model Y mechanical defects. This led to an expanded decline in representative secondary battery stocks on the KOSDAQ, driving further price drops."

Despite the overall weakness, clear differentiation among stocks was observed. The news that Seo Jung-jin, Honorary Chairman of Celltrion, is returning to management after two years has sustained the recent strength of the Celltrion trio. On the day, Celltrion rose 1.88%, Celltrion Healthcare 0.94%, and Celltrion Pharm 3.88%. Celltrion Healthcare and Celltrion Pharm continued their five-day consecutive rise. Haesoon Kwon, a researcher at Eugene Investment & Securities, commented, "Chairman Seo's return to management is a decision aimed at quickly making proactive investments, which is expected to positively influence Celltrion's mid- to long-term strategic planning. Given the sluggish pharmaceutical and bio industry due to economic downturn, now is the time for active investment." Following the election of Kim Ki-hyun as the new leader of the People Power Party, AhnLab, where Assemblyman Ahn Cheol-soo is the largest shareholder, plunged more than 12%. Due to Tesla-related concerns, EcoPro BM fell 1.91%, EcoPro 2.1%, and L&F 6.3%. On news of President Yoon Seok-yeol's visit to the U.S. at the end of April, reflecting export expectations, nuclear power stocks also showed gains. Doosan Enerbility rose 5.9%, and KEPCO KPS increased 2.37%.

U.S. Inflation Rises, Chinese Inflation Falls?A Problem

While persistent inflationary pressures in the U.S. continue to pose risks to the stock market, Chinese inflation has declined, dampening expectations for reopening.

China's February Consumer Price Index (CPI) and Producer Price Index (PPI), released that day, both fell compared to the previous month. According to the National Bureau of Statistics of China, China's February CPI rose 1.0% year-on-year but fell 0.5% month-on-month. Both figures were below market expectations of 1.9% and the previous month's 2.1%, marking the lowest increase since February 2022 (0.9%). Despite the resumption of economic activities, the pace of consumer recovery remains slow.

The February PPI fell 1.4% year-on-year, slightly below the market expectation of 1.3%, with the decline widening compared to the previous month (-0.8%). This is the lowest figure in 27 months since November 2020 (-1.5%).

Da-eun Lee, a researcher at Daishin Securities, analyzed, "China's economic recovery this year appears certain, but there remains high uncertainty regarding its strength and sustainability. Although positive expectations were high as the effects of China's reopening became visible, lingering domestic issues and external economic slowdowns could hinder China's economic recovery."

Until now, the stock market was able to rise despite U.S. inflation concerns and tightening fears because of expectations for China's reopening. However, as the reopening effect is delayed, such expectations are also expected to retreat.