[MarketING] KOSPI Retreats to 2500 Level Amid Challenges... From Short Selling to Tariffs

KOSPI Weekly Forecast Band: 2500 to 2650

The KOSPI fell below the 2600 mark for the first time in two weeks. This week (March 31 to April 4), volatility is expected to increase due to the resumption of short selling and reciprocal tariffs. However, since the uncertainties have been continuously reflected so far, it is anticipated that once the peak of uncertainty passes, stability will gradually be restored.

Yonhap News

Last week, the KOSPI dropped by 3.22%, and the KOSDAQ fell by 3.57%. The KOSPI lost the 2600 level, and the KOSDAQ also fell below 700 for the first time in about three months. Shin Seung-jin, a researcher at Samsung Securities, analyzed, "This week, with major events such as the resumption of short selling and the imposition of reciprocal tariffs by the U.S. becoming full-fledged, the domestic stock market last week continued to experience risk-averse selling pressure, resulting in weakness."

Concerns over tariffs are suppressing the stock market again ahead of the U.S. imposing reciprocal tariffs on April 2. Na Jeong-hwan, a researcher at NH Investment & Securities, said, "U.S. President Donald Trump plans to implement reciprocal tariffs on all countries starting April 2. President Trump emphasized that there will be no exceptions to the tariffs, and reciprocal tariff rates will be applied considering non-tariff barriers such as value-added tax (VAT) by country." He added, "South Korea may be included in the 'Dirty 15,' a group of countries with high non-tariff barriers, and sector-specific tariffs such as those on semiconductors will also be announced. While the perspective that tariffs are for negotiation purposes remains, if the U.S. applies high tariff rates to South Korea, increased stock price volatility is expected."

There are also opinions that the tariffs will only cause short-term shocks. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., said, "Although the situation is challenging, it appears to be a process of passing the peak of uncertainty." He analyzed, "Semiconductors and pharmaceuticals have bargaining power from a strategic asset perspective, and the automotive sector has hedged risks through large-scale investments by Hyundai Motor Group, so tariffs may act as a short-term shock followed by a positive factor of uncertainty resolution."

The market impact of short selling is expected to be limited, but differences by sector should be considered. Researcher Shin Seung-jin said, "The market impact of short selling, which resumes this week, is expected to be limited." He added, "However, there will likely be differences by sector. Shipbuilding, defense, and secondary batteries, which have seen increased loan balances, are expected to be targets, but in terms of earnings and momentum, the shipbuilding and defense sectors may attract attention and responses if they decline due to short selling." Researcher Kang Jin-hyuk explained, "Short selling will resume for all stocks for the first time in five years. The impact on the index is expected to be limited, but there may be movements to adjust positions at the sector and stock level." He added, "The top sectors by loan balance ratio include many battery and healthcare stocks."

The short-term volatility expansion of the KOSPI is expected to be an opportunity to increase weighting. Lee Kyung-min, a researcher at Daishin Securities, said, "On the 31st, the resumption of short selling and the anxiety and caution around the imposition of reciprocal tariffs on April 2 have intensified." He added, "However, since uncertainties have been pre-reflected, it is expected that the peak of anxiety and caution will pass, and the financial market will enter a phase of volatility easing. The short-term volatility expansion of the KOSPI is an opportunity to increase weighting."

Researcher Na Jeong-hwan said, "This is a period of increasing uncertainty not only due to the U.S. tariff implementation and major economic indicator releases but also due to the resumption of short selling and continued policy gaps in the domestic stock market." He added, "Volatility may be high depending on the event outcomes, but after uncertainty is resolved, a strategy to increase weighting in the semiconductor sector, which may attract concentrated foreign demand, will be effective." NH Investment & Securities projected the KOSPI range this week to be between 2500 and 2650.

Key schedules this week include the resumption of short selling in the domestic stock market on the 31st and the release of China's March National Bureau of Statistics Manufacturing Purchasing Managers' Index (PMI). On April 1, South Korea's March exports, the U.S. March Institute for Supply Management (ISM) Manufacturing Index, and China's March Caixin Manufacturing PMI will be released. On the 3rd, the U.S. March ISM Services Index will be announced, and on the 4th, the U.S. March employment report will be published.

Researcher Lee Kyung-min said, "On the 3rd, the ADP private employment report will be released, and on the 4th, the employment report will be announced. The ADP nonfarm employment is expected to increase to 118,000 from 77,000 in the previous month. If the results meet expectations, it may mark the peak of U.S.-originated economic anxiety." He added, "The ISM Manufacturing Index is expected to be 49.8, indicating a contraction phase, which may affect U.S. economic anxiety, but the services index announced on the 3rd is expected to be 53.0, maintaining expansion."