[Good Morning Stock Market] US Tariff Concerns and Short Selling Resumption... Increased Volatility

On the 31st, the KOSPI is expected to experience increased volatility due to concerns over U.S. tariffs and the resumption of short selling.

On the 28th (local time), the Dow Jones Industrial Average closed at 41,583.90, down 715.80 points (1.69%) from the previous session. The S&P 500 index fell 112.37 points (1.97%) to 5,580.94, and the tech-heavy Nasdaq index dropped 481.04 points (2.70%) to 17,322.99.

The New York stock market declined amid fears of stagflation materializing in the U.S. The U.S. real personal consumption expenditures released that day showed only a 0.1% increase from the previous month, expanding concerns about slowing consumption. Additionally, the University of Michigan's final consumer sentiment index recorded 57.0, below the preliminary figure of 57.9.

Jo Yeon-ju, a researcher at NH Investment & Securities, analyzed, "With the mutual tariff imposition scheduled for April 2, fears of a U.S. economic recession are being fully reflected. The U.S. core personal consumption expenditures (PCE) inflation rate recorded 2.8% year-on-year, exceeding the expected 2.7%, suggesting a possible delay in the Federal Reserve's rate cuts, which dampened investor sentiment."

Last week, the domestic stock market initially rose early in the week, driven by easing tariff concerns and Hyundai Motor Group's large-scale investment, which supported tariff-affected sectors. However, the announcement of U.S. mutual tariffs on April 2 and the resumption of short selling added caution, leading to a decline by the week's end.

Moreover, major U.S. semiconductor stocks, including Nvidia, showed weakness due to Microsoft’s reduction in data center investments and renewed concerns over AI profitability. Nevertheless, Samsung Electronics maintaining the 60,000 KRW level, buoyed by expectations of an early turnaround in the memory market, was seen as a positive sign.

This week, the domestic stock market is expected to continue a volatile trend amid major domestic and international events such as ▲ U.S. President Donald Trump's announcement on mutual tariffs ▲ U.S. March ISM Manufacturing Purchasing Managers' Index (PMI) ▲ South Korea's March exports ▲ U.S. March nonfarm payrolls ▲ the impact of the resumption of short selling in Korea ▲ and the announcement of the domestic impeachment trial verdict date.

First, since the cause of last week's correction in major global markets was Trump's surprise imposition of automobile tariffs, market attention is expected to focus on the details of the mutual tariffs. Recently, Trump stated that mutual tariffs would be imposed on all countries without exception but emphasized that they would be fair and generous.

Han Ji-young, a researcher at Kiwoom Securities, predicted, "Considering that Trump emphasized his willingness to negotiate after announcing mutual tariffs following the U.S. market close on Friday, the additional downward pressure on stock prices from mutual tariffs is expected to be limited."

She also explained that the resumption of short selling could temporarily distort stock prices from a supply-demand perspective. Han said, "There is persistent anxiety that concentrated short selling by foreigners in specific sectors such as semiconductors and defense will inevitably shock the index upon the resumption of short selling. In the short term, sectors with high loan balance growth rates last week, such as secondary batteries, bio, and high-bandwidth memory (HBM), may become targets of short selling, which could temporarily increase supply-demand volatility due to psychological unease."

However, she added, "It is important to note that the resumption of short selling will be limited to causing short-term supply-demand noise, and the direction of stock prices for the index or sectors will be determined by earnings and fundamentals."