KOSPI Rebounds: Market Shows Recovery Signals
Have you been watching the wild swings in the Korean market lately? After weeks of relentless decline, we're finally seeing some positive signs as the KOSPI makes a surprising rebound. ✨
Market Overview
The KOSPI closed at 6,856.83 on July 14, marking a +49.90pt (+0.73%) increase from the previous session. Despite this positive finish, the market had quite a journey, plunging to as low as 6,448.86 during the session before recovering strongly. This represents a 24.77% decline from the June 22 high of 9,114.55, making it the fastest correction period since the COVID-19 pandemic.
In contrast, the KOSDAQ showed a different pattern, closing at 783.98, down -15.38pt (-1.92%) from the previous day. The tech-heavy index fell to 749.76 intraday, now down 24.0% from its June peak.
What's particularly encouraging is the shift in market sentiment. Institutions purchased 3.2 trillion won worth of stocks, while foreigners turned to net buying of 965.5 billion won. This is a significant reversal from the previous selling trend. However, individual investors continued to panic, selling 4.1 trillion won worth of shares.
Key Market Points
SK Hynix ADR: The Double-Edged Sword
SK Hynix (000660) has been the star performer since its American Depositary Receipt (ADR) listing on NASDAQ on July 10. The stock surged an impressive +27.29% on July 14 (local US time), reaching new highs. Approximately 84,000 retail investors in Korea bought over 300 billion won worth on the first day of trading.
However, this ADR listing came with a twist. Foreign investors sold approximately 3.485 million shares of SK Hynix in the domestic market. This likely represents them converting their domestic holdings to ADR units or realizing gains. Today, the ADR premium level and the direction of foreign investor buying in the domestic market will be crucial to watch.
US Overnight Futures (Morning of July 15)
- S&P500 futures (ES): 7,589.0 (+0.34%)
- Nasdaq100 futures (NQ): 29,797.25 (+1.09%)
- Dow futures (YM): 52,787 (+0.04%)
The positive performance of US futures, particularly the 1% gain in Nasdaq futures, is encouraging for the opening sentiment of domestic semiconductor stocks. This rally comes amid renewed semiconductor sector strength and strong second-quarter earnings reports from major US banks like JP Morgan and Wells Fargo.
Macroeconomic Factors
Interest Rates
The Bank of Korea's benchmark interest rate remains at 2.5% (as of July 12). However, there's a significant gap between this rate and government bond yields, with 3-year bonds at 3.887% and 10-year bonds at 4.333%. The 10Y-3Y spread stands at 44.6 basis points.
The market is increasingly discussing a possible interest rate hike by the Bank of Korea this month, supported by reports that the US-Korea long-term interest rate inversion gap has narrowed to its smallest level in over three years. Such a hike could increase debt burdens for leveraged investors, potentially negatively impacting domestic consumption.
Exchange Rates
The won-dollar exchange rate stood at 1,498.48 on July 14, down 7.43 won (-0.49%). While the won showed slight strength, it continues to find support around the 1,500 level.
Inflation
June's import prices fell -4.4% year-over-year, marking the largest decline in 3.5 years. This drop reflects falling international oil prices across mining and petroleum products. This downward trend in import prices could ease consumer price inflation through producer prices, complicating the Bank of Korea's policy decisions.
Today's Key Events to Watch
- Announcement of basic construction cost cap for housing price ceiling system (expected to rise 0.77%)
- Bank of Korea Monetary Policy Committee meeting (exact schedule to be confirmed)
Conclusion
The Korean market shows promising signs of recovery with institutions and foreigners both turning to net buying, particularly driven by SK Hynix's ADR performance. What are your thoughts on this market rebound? Do you think the positive momentum will continue? Let me know in the comments below! 💬