Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
N. Korea risk, earning shocks cause Seoul's stock market to stumble
An electronic signboard at Seoul's Hana Bank shows the benchmark KOSPI closing at 2,440.04 points, Thursday, up 4.14 points or 0.17 percent from the previous session. Yonhap
By Yi Whan-woo
Korean stocks have been performing sluggishly since the beginning of the year after advancing about 5 percent in December alone on the back of the U.S. central bank’s dovish shift in its monetary policy.
Analysts said Thursday that market sentiment in Seoul was increasingly weak due mainly to North Korea’s military threats that go beyond their usual bluster.
They also said the earning shocks suffered by Samsung Electronics and LG Energy Solution in the fourth quarter added to to the weak sentiment at the moment, considering the semiconductor and secondary battery sectors were considered highly promising.
Moreover, prospects for a U.S. rate cut dwindled as the U.S. Federal Reserve said it got “way ahead of itself” in late 2023, concerning its shift in monetary policy, by not taking into consideration jobs and other economic factors, which are still unstable.
The benchmark KOSPI retreated more than 8 percent, hovering at 2,400 points this week, after closing at 2,665.28 points on Dec. 27, the last trading day of 2023.
Korea correspondingly sits at the bottom among G20 economies in terms of growth rates concerning respective stock markets.
On Thursday, the KOSPI gained slightly — 4.14 points or 0.17 percent — to close at 2,440.04 points.
“Under the circumstances, the stocks possibly will lose ground for a couple of months as the risk factors are likely to persist,” Hi Investment & Securities analyst Lee Woong-chan said.
He noted that foreign investors dumped shares worth more than 900 billion won, in the midst of North Korean leader Kim Jong-un’s call to accelerate war preparations as well as the ratcheting up of missile provocations.
The leader has been steadily eradicating the traces of the legacy of inter-Korean cooperation. Such a move is rarely witnessed in the North and the repercussions on Seoul's stock market due to Pyongyang’s military threats should not be overlooked, according to Lee.
Speaking about semiconductor and secondary battery stocks, KB Securities analyst Lee Eun-taek said that the chip industry is steadily recovering but the pace of growth “will not increase dramatically.”
For the secondary batteries, he assessed that former U.S. President Donald Trump’s possible return if all goes according to his plans in the presidential election is “casting doubt on Korean battery manufacturers in the U.S. considering Trump is not an advocate of green policies."
Asked whether the Korean government’s market-friendly policies would help boost the KOSPI, Hanyang University economics professor Ha Joon-kyung remained skeptical.
The recent policies include a ban on short selling in the name of protecting retail investors and a raise in the capital gains tax threshold from 1 billion won to 5 billion won for shareholders to prevent a year-end selling spree.
“All these policies can help draw investors only when the country’s economy and its business are faring well, which in fact appears to not be the case,” Ha said.