The KOSPI fell below 3,100 for the first time since April, in addition to the sharp decline in semiconductor stocks, austerity signals from the US Federal Reserve, and the fall in the won’s price, ‘peak out’ (a decline after economic or corporate earnings peaked). It is interpreted that this is because concerns are spreading. This is because the perception that the business cycle has turned to a downtrend in the mid- to long-term has spread mainly to foreign investors.
In the short term, concerns about the Fed’s ‘tapering (reducing asset purchases)’ may be faster than expected, and investor sentiment in the stock market seems to be shaking. Experts predict the possibility of a downtrend in the Korean stock market in the short term, but expect the differentiated flow by stock to continue as corporate earnings are improving.
According to the Korea Exchange on the 19th, foreign investors have net sold more than 8 trillion won in the stock market since the 9th of this month. Foreigners net sold 8.491 trillion won in May, the most on a monthly basis, and the possibility of breaking the May record is emerging this month.
U.S. Federal Reserve officials have been trying to dampen the shock of the stock market by consistently mentioning tapering since May. However, the fact that foreigners have been net selling for eight consecutive trading days this month does not simply mean that the end of the ‘liquidity party’ is in sight.
A more fundamental cause is that the global economy has already peaked and foreigners are starting to see a downward trend. The Korean stock market has a higher proportion of cyclical stocks that are sensitive to economic fluctuations than advanced countries such as the US and Japan. The stocks that foreigners have been selling intensively this month were also cyclical stocks. According to the exchange, the industry that foreigners net sold the most this month was by far the semiconductor industry. Samsung Electronics alone sold 5.781.9 trillion won worth of net sales until the 18th, and SK Hynix also sold 1.81 trillion won worth of sales during the same period. The ‘semiconductor two-top’ alone sold more than 8 trillion won worth of, but considering that the total amount of net sales in the stock market during this period was about 6 trillion won, it’s actually close to ‘panic selling’.
The stocks that responded sensitively to fear were also business cycle stocks. In the stock market on the 18th, POSCO stock plunged 4.71%, and Hyundai Motor (-2.82%), KB Financial (-3.21%) and SK Innovation (-4.37%) fell sharply. These are all classified as cyclical stocks, which are closely related to the economic trend and share price fluctuations, such as semiconductors. In particular, the stock price of HMM, which is linked to global trade volume and stock price, plummeted 6.98% in one day alone.
A similar phenomenon was observed in Asian stock markets on the same day. Stock markets in countries with a high export ratio to gross domestic product (GDP) fell sharply. Japan’s Nikkei 225 Index fell 1.10% on the day.
Kim Seung-hyeon, head of research center at Yuanta Securities, said, “There is a growing concern that the economy has peaked due to the sharp drop in China’s industrial production index for July and the US consumer sentiment index for August released this week. As issues such as tapering came to the fore, anxiety was amplified,” he explained. He pointed out, “It is also a worrying situation that the consumption index for durable goods this year is declining after people consumed an abnormally large amount of durable goods last year due to COVID-19.”
The problem is that the domestic stock market itself has lost its upward momentum due to the peak-out controversy and tapering, which means the beginning of tightening. Skepticism prevails as to whether foreigners will suddenly come back and buy back Samsung Electronics and SK Hynix, the first and second largest memory semiconductor companies by market capitalization. However, the outlook for the non-memory side is still good.
Kim Kyung-min, a researcher at Hana Financial Investment, said, “The non-memory semiconductor industry is robust.
Jaeyoon Lee, a researcher at Yuanta Securities, said, “Even though the boom in the 8-inch foundry is expected to be prolonged, DB Hitech’s stock is trading at 7 times the price-earnings ratio (PER) as of 2022.” We expect to make a profit,” he said.
Experts emphasize that the Korean stock market has entered a bear market in the short term, but could rebound in the long term. As Korean companies’ performance is improving steadily, it is necessary to differentiate and invest by stock. Lee Kyung-soo, head of research center at Meritz Securities, said, “We expect corporate profits to record 160 trillion won this year and 175 trillion won next year.” .
“We believe that foreigners have sufficiently reduced their share of semiconductors in the Korean stock market, so if foreign sales gradually decrease, the decline will not continue,” said Lee.
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