"Highlighting Political Risks... Increased Short-Term Volatility in the Stock Market"

Sangsangin Securities Report
High Possibility of Foreigners Leaving Due to Political Risk

As political event-related risks have come to the forefront, there is a forecast that short-term volatility in the Korean stock market may increase.

Hwang Junho, a researcher at Sangsangin Securities, stated in a report released on the 4th, "The KOSPI rebounded as it was confirmed that the index is improving thanks to the rise in new orders in the US ISM manufacturing index, attracting net buying from foreign investors." He added, "However, the possibility of foreign capital outflow remains due to the highlighted risks from political events, which can still increase short-term volatility in the Korean stock market."

As of the 3rd, the KOSPI closed at 2,500.1, down 0.80% from the previous week. Compared to the previous month, it fell by 1.66%. The 3-month return recorded -3.13%. Researcher Hwang explained, "The Korean stock market showed a downward trend following remarks by then US President-elect Trump about additional tariffs on China, Canada, and Mexico, as well as news that key cabinet members continued to criticize subsidy policies under CHIPS and IRA." He added, "The decline was especially notable in the semiconductor and secondary battery sectors."

The effect of the interest rate cut was also limited. Hwang said, "At the November Monetary Policy Committee meeting of the Bank of Korea, the base interest rate was cut unexpectedly, which partially restored risk asset preference." However, he noted, "Following the announcement of the monetary policy direction statement, concerns about increased downside growth pressure due to a slowdown in export growth led to a contraction in investment sentiment toward the Korean stock market. Except for some sectors like bio and entertainment, the effect of the rate cut was relatively limited."

In the case of semiconductors, a short-term decline is inevitable due to export regulations. He stated, "Although the possibility of HBM exports to Nvidia has increased, Samsung Electronics, which has a relatively larger share of HBM exports to China compared to SK Hynix, is expected to be significantly impacted by these export regulations, failing to reduce the weekly decline." However, he pointed out, "Considering that most of the current HBM demand is from the US, especially Nvidia, rather than China, the impact of export regulations will be limited to short-term downward pressure."