June 25, 2018

‘External uncertainties to heighten stock market sensitivity’

PUBLISHED : May 19, 2017 - 18:02

UPDATED : May 19, 2017 - 18:02

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[THE INVESTOR] Developing external uncertainties will heighten sensitivity of the main bourse of South Korea, according to market experts on May 19. 

The first-tier market has been riding on momentum for nearly a month backed by first-quarter earnings surprises of local listed firms and President Moon Jae-in‘s highly-anticipated move to improve corporate structure and induce institutional investors to adopt a stewardship code.

The benchmark Korea Composite Stock Market Index, however, suffered a two-day slump until May 18 closing. The Kospi dropped 0.1 percent and 0.27 percent on May 17 and May 18, respectively.

On May 19, the slump ended closing at 2,288.48, up 0.07 percent.

Referring to the latest falls in stocks, Park Chun-young, a strategist at Daishin Securities, said Kospi stock buyers should brace for upcoming external woes next week, such as a decision by creditors to debt-saddled Greece and a move by the US Federal Open Market Committee.

“The Kospi will bump into changes in foreign investors’ buying pattern,” Park wrote in his report on May 19. “The external risks are likely to prompt a deeper downward fluctuation in Kospi, while the risk appetite will be on the wane, triggering foreign selling.”

The Eurogroup meeting on May 22 will review a third bailout on Greece, which might open the road for its debt relief. The FOMC on May 25 will release its meeting minutes, which might implicate a rate hike,

The decisions might add to “the development related to US President Donald Trump and the following change of patterns in foreign buying,” according to Park. A special counsel was named May 18 to investigate Trump on allegations that Trump had steered dismissed FBI director James Comey away from probing on his Russia connections.

Jeong Yong-taek, an economist at IBK Securities, said the market‘s volatility is in the hands of Trump’s future. 

“The bleaker the Trump administration‘s future becomes, the more likely a rate hike is to take place -- when it is able to,” Jeong wrote May 19. “What is important is, it is time to adjust the excessive anticipation on the local market.”

By Son Ji-hyoung/The Korea Herald (

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