[Click eStock] "Ncarry Shock Limited... Rather an Opportunity to Increase Weight"

Breaking Below 2450, Fear Triggered by Yen Carry Trade Liquidation
Situation Different from First Yen Carry Trade Fear in August
KOSPI Still Undervalued... Should Be Used as an Opportunity to Increase Exposure

Last week, the KOSPI briefly fell below the 2450 level during trading. The main causes were identified as the downgrade of South Korea investment ratings by foreign investment banks (IBs), concerns over semiconductor regulations, and the liquidation of yen carry trade positions. The Consumer Price Index (CPI) in Tokyo, Japan, significantly exceeded expectations, increasing the likelihood of a Bank of Japan (BOJ) rate hike in December. The yen-dollar exchange rate broke below the 150 level, indicating yen appreciation. As a result, large-scale sell-offs occurred in both the KOSPI spot and futures markets.

According to Daishin Securities, this sharp decline seemed to recreate the panic sell-off triggered by the liquidation of yen carry trade positions in early August. At that time, the KOSPI dropped from 2790 to 2380 in just two days, recording an intraday decline of -14.57% from the peak.

Lee Kyung-min, a researcher at Daishin Securities, stated, "However, the current situation is different from that time," adding, "The speculative yen position currently shows a net short of 47,000 contracts, which is about half the maximum net long position of 70,000 contracts." This situation occurred after the initial wave of liquidation in early August, so even in the worst case, the impact is expected to be about half as severe.

Furthermore, while major countries are strengthening their commitment to economic stimulus, South Korea also implemented consecutive interest rate cuts for the first time in 15 years. Lee said, "The attractiveness of the still undervalued KOSPI is likely to increase," and "Therefore, this volatility can be used as an opportunity to increase exposure."