[MarketING] Heightened Wariness Among Foreigners

KOSPI Closes Lower... Falls Below 2610 Again
Ukrainian Reconstruction Stocks Show Strong Performance

The KOSPI fell below the 2610 level again. This was due to foreign investors unloading profit-taking sales amid growing caution over hawkish remarks from U.S. Federal Reserve (Fed) officials. Since a series of Fed officials' remarks are scheduled this week, the cautious sentiment is expected to persist for some time. While the overall stock market showed sluggish movement, stocks related to Ukraine reconstruction stood out with strong performance.

KOSPI Closes Lower... Drops Below 2610

On the 19th, the KOSPI closed at 2609.50, down 16.29 points (0.62%) from the previous day. The KOSDAQ ended the session at 888.61, up 0.66 points (0.07%). The KOSDAQ successfully turned to gains near the end of trading and closed in a slightly positive range.

[Image source=Yonhap News]

Foreign and institutional selling led the index decline. On that day, foreigners net sold 359.4 billion KRW in the KOSPI market and 201.6 billion KRW in the KOSDAQ market. Institutions sold 77.8 billion KRW and 11.4 billion KRW respectively. Individual investors were the only net buyers, purchasing 430 billion KRW and 229.1 billion KRW.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "Following the U.S. holiday, Fed officials' remarks are scheduled, which triggered caution and expanded the dollar's strength, leading to increased foreign selling pressure that weighed on the index." On the same day, the won-dollar exchange rate closed at 1282.0 won, up 10.1 won from the previous trading day in the Seoul foreign exchange market.

The direction of the KOSPI and KOSDAQ indices diverged due to the stock prices of major secondary battery companies. In the KOSPI, LG Energy Solution, the leading secondary battery stock, fell 4.59%, dragging the index down. The stock weakened on news that LG Chem, the largest shareholder of LG Energy Solution, is planning to sell a minority stake. Conversely, in the KOSDAQ market, EcoPro rose 4.32%, helping to prevent the index from falling. Researcher Kim explained, "The KOSPI showed weakness due to declines in large secondary battery and semiconductor stocks and increased foreign selling. LG Energy Solution dropped nearly 5% intraday on news that LG Chem is working on selling LG Energy Solution shares to overseas investors. Meanwhile, the KOSDAQ was supported by gains in secondary battery stocks, which helped defend against index declines."

There is an opinion that gauging market sentiment is more important than anything else at this point. Joonki Cho, a researcher at SK Securities, said, "In the current situation, it is more important to focus on how the market reacts to economic indicators or central bank interest rate decisions rather than the actual results themselves. The bottom of sentiment is when the market does not fall or even rises despite negative news, and the top of sentiment is when the market does not rise or even falls despite positive news."

Strong Performance of Ukraine Reconstruction-Related Stocks

While the index showed sluggish movement amid foreign and institutional selling due to cautious sentiment, stocks related to Ukraine reconstruction showed remarkable strength.

On that day, Sambu Construction and RBK Group both hit the daily limit up, and DYD (26.11%), Kumkang Industrial (24.57%), and Nature & Environment (22.26%) posted significant gains.

Expectations for Ukraine reconstruction projects appear to be driving the stock price increases. The "2nd Ukraine Reconstruction Conference" is scheduled to be held in London, UK, from the 21st to the 22nd. Sambu Construction is participating in Ukraine reconstruction plans, having previously signed a memorandum of understanding (MOU) for a joint reconstruction project with the city of Irpin in Ukraine.

Additionally, Research Alom stated in a report on the same day that attention should be paid to K-modular (prefabricated) related stocks in connection with the Ukraine reconstruction project. The report forecasted that as the 1200 trillion KRW-scale Ukraine reconstruction project officially begins bidding over the next 10 years, K-modular companies are expected to benefit.