[Good Morning Stock Market] Increased Volatility Due to Joe Biden Resignation... KOSPI Expected to Start Lower

On the 22nd, the KOSPI is expected to start lower due to the impact of U.S. President Joe Biden's decision not to seek re-election and the sluggish U.S. stock market.

On the 16th, the KOSPI index opened at 2,861.71, up 0.79 points (0.03%) from the previous trading day, and the won/dollar exchange rate started at 1,384.0 won, up 0.8 won. Dealers are working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Jo Yongjun jun21@

According to the Korea Exchange, last week the KOSPI closed at 2,795.46, down 61.54 points (2.15%) from the previous week. During this period, institutional investors net bought 125.7 billion KRW in the securities market, while individuals and foreigners net sold 36.7 billion KRW and 77 billion KRW, respectively.

The news of U.S. President Joe Biden's withdrawal from the presidential race is expected to affect the domestic stock market. President Joe Biden (82) announced on the 21st that he would withdraw from the Democratic Party presidential nomination. This comes about three weeks after receiving pressure from within and outside the progressive camp to withdraw following a poor TV debate performance on the 27th of last month.

Ji-won Kim, a researcher at KB Securities, said, "Not only large tech stocks but the overall U.S. stock market showed weakness, reflecting political uncertainty, making differentiated stock movements inevitable. With investment sentiment weakened by the IT crisis, major companies such as Alphabet and SK Hynix are scheduled to announce earnings, so we need to prepare for increased volatility."

There are also opinions that the KOSPI could fall as low as 2,650 points.

Dae-jun Kim, a researcher at Korea Investment & Securities, said, "In the recent rapid decline of the KOSPI, it is necessary to keep the downside open. The current index is at a 12-month trailing price-to-book ratio (PBR) of 1, where market value equals book value, but if additional downward pressure occurs here, it is not impossible to see 2,650 points, which corresponds to a 12-month forward price-to-earnings ratio (PER) of 9."

Researcher Kim added, "Generally, the stock market tends to experience increased volatility just before the U.S. presidential election. We are currently in that process. A defensive approach to the market seems necessary for the time being."