Kospi ends first half with biggest drop of 21.7% in 32 years, may drop to 2,100 in second half
South Korea’s benchmark stock index shed nearly 22% in the first half and could drop another 8% in the second half to hit as low as 2,100 as concerns over the global crisis sparked by inflation weigh on the trade-dependent economy.
The Kospi fell below 2,300 for the first time in 20 months on Friday before closing at 2,305.42. Shares were slightly higher on Monday morning.
As many as 74 on the Kospi and 102 on the Kosdaq renewed their 52-week lows, including the Samsung Electronics and Kakao indicators.
Investment sentiment deteriorated amid growing concerns for the economy heavily dependent on external demand and imports as the trade deficit swelled to more than $10 billion in the first half, the largest on record over a six-month period with high prices of costly imports fueled by weak Korea gained/
“Kospi barely holds the 2,300 mark as concerns grow over Korea’s deteriorating relationship with China, headwinds in the secondary battery industry, increased pressure on the weakening won due to widening trade deficit and uncertainty in the chip industry,” said Lee Kyung-min, chief investment strategist at Daishin Securities.
Global recession fears deepened after U.S. chipmaker Micron Technology released weaker-than-expected forecasts for its upcoming fiscal quarter last week.
“Concerns grew over the technical depression in the United States after the Federal Reserve Bank of Atlanta’s GDPNow tracker warned of negative growth for the second quarter,” said Kiwoom Securities researcher Han Ji-young. “There is sluggish demand across key industry sectors and continued concerns over excess inventory, particularly in the chip industry following Micron’s quarterly earnings announcement.”
The Korean market was one of the worst performers and would remain weak in the second half.
Kospi lost 21.7% from January 3 to June 3, the biggest first-half loss in 32 years.
No less than 489 trillion won had been wiped from the market capitalization of Kospi and Kosdaq.
The top 10 stocks were the biggest losers with Kakao plunging 37.89%, Naver 36.59%. Samsung Electronics 27.2%, SK Hynix 30.53%, Hyundai Motor 13.64% and Kia 5.96%.
Growth stocks like internet and gaming stocks and large chip stocks were hit hard as they were the first to be dumped by foreign investors who exited the market due to faster U.S. rate hikes.
The outlook for the second half is no better.
KB Securities expects the Kospi to range between 2,100 and 2,750. NH Investment & Securities, Samsung Securities and MERITZ Securities presented between 2,200 and 2,700 while Kiwoom Securities presented between 2,200 and 2,800.
The Kospi could drop even further if U.S. inflation figures turn out to be higher than expected, said Cho Byung-hyeon, head of investment strategy at Daol Investment & Securities.
By Kim Geum-yi and Lee Eun-joo
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