Kospi ends H1 in largest fall of 21.7% in 32 yrs, may go down to 2,100 H2

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South Korea’s benchmark stock index lost nearly 22 percent in the first half and could fall additional 8 percent in the second half to touch as low as 2,100 as concerns for inflation-triggered global slump weigh over the trade-reliant economy.

The Kospi sank below 2,300 for the first time in 20 months on Friday before closing at 2,305.42. Shares were marginally higher early Monday.

As many as 74 on the Kospi and 102 on the Kosdaq renewed their 52-week lows including bellwethers Samsung Electronics and Kakao.

Investment sentiment worsened amid rising worries for the economy heavily reliant on external demand and imports as trade deficit swelled to above $10 billion in the first half, the largest-ever for a six-month period with high prices from expensive imports fueled by the weak Korean won/

“Kospi is barely holding onto 2,300 mark as concerns rise about Korea’s worsening relations with China, unfavorable factors in secondary battery industry, increased pressure on weakening won due to widening trade deficit, and uncertainty in chip industry,” said Lee Kyung-min, head of investment strategy at Daishin Securities.

Jitters for global recession were heightened after U.S. chip manufacturer Micron Technology delivered a weaker-than-expected forecast for its next fiscal quarter last week.

“Concerns have grown about technical depression in the United States after the Federal Reserve Bank of Atlanta’s GDPNow tracker warned negative growth for the second quarter,” said Han Ji-young, a researcher at Kiwoom Securities. “There is sluggish demand in major industry sectors and continued concern over inventory surplus especially in chip industry after Micron’s quarterly result announcement.”

The Korean market has been one of the worst performers and would remain weak in the second half.

Kospi lost 21.7 percent from Jan. 3 to June 3, the biggest defeat for the first half in 32 years.

As much as 489 trillion won had been wiped out of the market cap of Kospi and Kosdaq.

The 10 top stocks were biggest losers with Kakao plunging 37.89 percent, Naver 36.59 percent. Samsung Electronics, 27.2 percent, SK hynix 30.53 percent, Hyundai Motor 13.64 percent, and Kia 5.96 percent.

Growth stocks like internet and game stocks and large chip stocks were battered heavily as they were first to be dumped by foreign investors who have been abandoning the market in line with the faster rises in U.S. rates.

The outlook for the second half is no better.

KB Securities forecast Kospi to be between as low as 2,100 and as high as 2,750. NH Investment & Securities, Samsung Securities, and MERITZ Securities presented between 2,200 and 2,700 while Kiwoom Securities between 2,200 and 2,800.

The Kospi may decline even further if the U.S. inflation figures come out higher than expected, said Cho Byung-hyeon, head of investment strategy at Daol Investment & Securities.

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