Uncertainty Over President Trump's Policies Triggers U.S. Stock Market Decline
Domestic Market Shows Greater Policy Capacity
Undervalued Appeal Expected to Stand Out... Calls for Calm Response
Despite the sharp decline in the New York stock market, the domestic stock market performed relatively well. Although the KOSPI fell by as much as -2.51% during the session, individual investors stepped in to buy at lower prices, reducing the extent of the decline. Officials in the domestic asset management industry urged a calm response rather than hastily adjusting portfolios amid growing concerns about a U.S. economic recession. They advised that it would be advantageous to develop investment strategies while monitoring upcoming economic indicators.
According to the financial investment industry on the 11th, the KOSPI closed at 2,537.60, down 1.28% from the previous day. The index, which had dropped to 2,505.91 early in the session, narrowed its losses by the close. The KOSDAQ index, which nearly fell below the 700 mark, ended trading at 721.50, down 0.6% compared to the previous day.
In the stock market, individuals showed a net buying advantage of 491.7 billion KRW, while foreigners and institutions recorded net sales of 363.5 billion KRW and 237.1 billion KRW, respectively. In the KOSDAQ market, individuals and foreigners had net buying advantages of 48.8 billion KRW and 45.3 billion KRW, respectively. Institutions were reported to have net sold 87 billion KRW.
Experts from major domestic asset management firms cited policy uncertainty under U.S. President Donald Trump as a cause of the market decline. Another reason for the large drop in the U.S. stock market is that it had risen relatively more compared to major global stock markets last year.
Jungsang Jin, Head of Equity Management at Korea Investment Trust Management, explained, "The overnight sharp decline in the U.S. market stemmed from the stock market's distrust of President Trump's policy direction and effectiveness," adding, "Of course, if the U.S. stock market continues to fall amid an economic recession, global stock markets could be affected."
Lee Hayoung, Head of Research at KB Asset Management, also analyzed, "Last weekend, President Trump assessed that the U.S. economy is in a transitional phase," and "After stating that current policies would be maintained, the U.S. stock market fell sharply."
Looking ahead, the possibility of a sharp decline in the domestic stock market is not considered high. Kim Jeongsu, Head of Research Division 1 at Mirae Asset Global Investments, predicted, "The U.S. stock market fell excessively due to heightened recession fears linked to President Trump's actions," and "In the domestic market, concerns over U.S. tariff policies have had a negative impact, but much of this has already been priced in." He added, "Although market sentiment is negative due to falling interest rates and indices, the negative impact will be limited thanks to benefits from China's economic stimulus measures, low valuations in the domestic market, and sectors with improving earnings such as shipbuilding and defense."
Expectations for a rebound following the resolution of political uncertainties remain strong. Lee Hayoung said, "Export stocks tied to the U.S. economy and foreign selling pressure may persist in the domestic market," but "toward the end of this month, we can expect the resolution of domestic political uncertainties, strong policy capacity including supplementary budgets, and foreign capital inflows due to the resumption of short selling."
Jungsang Jin expressed optimism, stating, "The Korean market has strong undervaluation appeal and differentiated drivers such as expanded shareholder returns," and "Once political uncertainties are resolved, it will show a more distinct relative strength."
Im Byunghyo, AI Quantitative Management Team Leader at Samsung Asset Management, advised, "For the time being, it is necessary to closely monitor changes in corporate earnings forecasts rather than valuation levels and respond accordingly to the market."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
