[MarketING] KOSPI Falls on Profit-Taking, KOSDAQ Smiles on Secondary Battery Sector

KOSPI Falls Below 2580 After 3 Days...
Recovered 2590 Early but Turned Down Due to Profit-Taking

The KOSPI closed lower after three days of gains. Profit-taking following recent rises pulled the index down. The KOSDAQ continued its upward trend for the second consecutive day. Secondary battery stocks surged significantly, driven by positive sentiment from Tesla, leading the index higher.

KOSPI falls after three days... dips below 2570 level

On the 31st, the KOSPI closed at 2,577.12, down 8.4 points (0.32%) from the previous day. The KOSDAQ ended the session at 856.94, up 5.44 points (0.64%). After starting lower and then rising to the 2,590 level, the KOSPI weakened again due to profit-taking.

[Image source=Yonhap News]

Institutions dragged the KOSPI down. On the day, institutions sold a net 287.1 billion KRW in the KOSPI market but bought 111.3 billion KRW in the KOSDAQ market. Individuals net bought 63.8 billion KRW in the KOSPI market but sold 235.4 billion KRW in the KOSDAQ market. Foreign investors net bought 214.7 billion KRW and 138.3 billion KRW in the two markets respectively, but sold over 500 billion KRW in the futures market.

Profit-taking by institutions and individuals led to declines in semiconductor stocks, which had shown recent strength. Samsung Electronics closed down 1.24%, and SK Hynix fell 1.54%. Institutions were the largest sellers of SK Hynix with net sales of 153.3 billion KRW, followed by Samsung Electronics with net sales of 51.7 billion KRW. Individuals also sold Samsung Electronics and SK Hynix, with net sales of 82.9 billion KRW and 22.7 billion KRW respectively, ranking them among the top net sellers.

In the KOSDAQ market, secondary battery stocks led the index higher, buoyed by Tesla CEO Elon Musk's visit to China and Tesla's 4% gain the previous day. EcoPro BM rose 4.18%, EcoPro increased 3.11%, and L&F climbed 3.45%.

Researcher Kim Seok-hwan of Mirae Asset Securities analyzed, "Semiconductor stocks, which had risen recently on expectations of benefits from Nvidia-driven AI industry development, showed differentiation with foreign investors buying and individuals selling. The KOSDAQ maintained its upward trend due to strength in secondary battery stocks, with Tesla's stock rebound following Musk's visit to China positively influencing investment sentiment in secondary batteries."

China's reopening effect falls short of expectations

Negative impacts on the stock market were observed as China's economic indicators released that day showed weakness.

China's National Bureau of Statistics announced that the manufacturing Purchasing Managers' Index (PMI) for May was 48.8. This figure is below both the previous month's 49.2 and the market forecast of 49.8. It has remained below 50 for two consecutive months, indicating a continued contraction phase in the economy. The PMI is a business outlook indicator surveyed among personnel and purchasing managers; a reading above 50 indicates expansion, while below 50 signals contraction.

China's non-manufacturing PMI for May was 54.5, maintaining expansion but falling short of the previous month's 56.4 and the market expectation of 55.0.

Researcher Kim explained, "The manufacturing PMI for May falling below expectations raised renewed concerns about economic slowdown, negatively affecting the domestic stock market. Consumer sectors related to China, such as cosmetics and apparel, also showed weak performance."

Although expectations for reopening (resumption of economic activities) increased after China ended its zero-COVID policy late last year, the effects have fallen short of expectations. Researcher Lee Young-won of Heungkuk Securities stated, "The reopening effect of China, which was expected to play a crucial role in global economic recovery, has yet to become fully visible. Since the abrupt lifting of lockdowns faster than anticipated late last year, expectations for China's reopening effect have been high since early this year, but positive effects have only been observed in limited areas such as domestic consumption, and it has not yet reached a level that broadly benefits the global economy including Korea."

The Chinese stock market also showed relatively weak performance. Since the beginning of the year, the Shanghai Composite Index has risen just over 4%, and the Shenzhen Composite Index about 1%. This is significantly weaker compared to the Nikkei 225 in Japan and the Korean KOSPI, which rose about 18% and 14% respectively through last week.

The slow recovery of China's real estate market and consumption is cited as a reason why the reopening effect has fallen short of expectations. Researcher Lee said, "External factors such as escalating trade tensions between the U.S. and China seem to be influencing China's slow recovery, but the biggest cause is the sluggish improvement in the domestic economy, including the real estate market, which has not recovered even after the lifting of lockdowns." He added, "The reopening effect can spread externally only after a clear recovery in the real estate market and growth in domestic indicators such as retail sales is confirmed."