Korea’s financial market tumbles due to bearish conditions

Employees work in the dealing room of Hana Bank in central Seoul on Sunday. Han Soo-bin Reporter

The Korean financial market has been tumbling since the beginning of the year due to bearish conditions. Geopolitical risks at home and abroad, such as North Korea, and the sluggish performance of the largest domestic companies in terms of market capitalization, such as Samsung Electronics, are having a negative effect on the market. Expectations for a rate cut by the U.S. Federal Reserve (Fed), which led the "Santa Claus rally" in the second half of last year, are also cooling.

On January 17, the benchmark Korea Composite Stock Price Index (KOSPI) closed at 2435.90, down 61.69 points (2.47 percent) from the previous day. The junior Kosdaq also closed at 833.05, down 21.78 points (2.55 percent) from the previous day.

In the KOSPI market, foreigners net sold 905.5 billion won, pulling down the index. Institutions also net sold 11.9 billion won while individuals net bought 852.2 billion won. In the Kosdaq market, foreigners also net sold 177.1 billion won, lowering the index. Individuals and institutions net bought 173.3 billion won and 14.5 billion won, respectively.

The KOSPI fell on 10 out of 12 trading days this year. The KOSPI has fallen 8.71 percent from the first trading day of this year to today, giving back gains from the Santa Claus rally and falling to a level similar to that of mid-November last year. This is in contrast to the U.S. Nasdaq Composite and Japan's Nikkei 225 Index, which have risen 1.21 percent and 6.58 percent, respectively, so far this year.

The dollar is also strengthening due to the preference for safe assets. The won-dollar exchange rate rose more than 10 won for two days in a row. On the 17th, the won-dollar exchange rate rose 12.4 won to close at 1344.2 won per dollar in Seoul's foreign exchange market. The exchange rate also rose 11.6 won on the previous day. Interest rates on treasury bonds also rose. In Seoul’s bond market, the three-year treasury bond rate closed at 3.277 percent per annum, up 0.042 percentage points from the previous day.

Traders cite increased geopolitical risks as a reason for the sluggish domestic stock market. Tensions with North Korea are rising unprecedentedly, and there is a growing fear that the war may escalate in the Middle East. On top of that, concerns over a slowdown in China's economy, where Korea is highly dependent, are also acting as downward pressure on the stock market.

Hwang Seung-taek, head of the Hana Financial Investment Research Center, said, "The weakening market expectations for the U.S. Fed's rate cut and poor performance of Samsung Electronics and other companies are reflected in the stock market.," adding, "The intensifying geopolitical risks from North Korea are also affecting stock prices by overlapping with other negative factors."

※This article has undergone review by a professional translator after being translated by an AI translation tool.