Stocks face turbulence but remain resilient

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By Jhoo Dong-chan

Concerns are growing among investors that the benchmark KOSPI could dip below the 2,000 point mark amid a weak economic outlook.

The index dipped over 1 percent last Wednesday.

The nation's stock market enjoyed a bullish run for the first four months this year thanks to foreign investors' steady purchases.

But they suddenly turned their backs on local stocks as the United States and China upped the ante on trade.

According to the Korea Exchange (KRX), foreign investors bought 6.88 trillion won ($5.75 billion) worth of shares in the first four months.

Thanks to their rush to the bourse, the KOSPI rose above the 2,200-point level last month.

The uptrend, however, failed to continue its momentum as foreign investors dumped 2.35 trillion won worth of shares this month.

Due to their exit from the bourse, the KOSPI closed at 2,023.32 on the Wednesday session, down 25.51 points, or 1.25 percent, from the previous session.

The secondary Kosdaq also failed to sustain the 700-point level as it was down 11.29 points, or 1.61 percent, from a day ago to reach 691.47.

Skeptics said the foreign sell-off has been driven by U.S. President Donald Trump's hawkish stance following Washington's trade talks with Chinese representatives.

“I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” Trump said during a recent press conference in Tokyo alongside Japanese Prime Minister Abe Shinzo.

“They would like to make a deal. We are not ready to make a deal.”

Backed by a strong U.S. economy, Trump indicated the trade negotiation between the world's two largest economies could linger longer than anticipated.

This immediately led to a massive foreign capital exit from the Seoul bourse Wednesday. The KRX said foreign investors dumped 490 billion won worth of shares on the day.

Still confident

NH Investment & Securities Research Division Managing Director Lee Chang-mok, however, displayed his confidence in the nation's stock market since a number of uncertainties have already cleared out.

“It could dip below the 2,000-point market for a little while,” he said.

“Not only the main bourse, but also other major stock exchanges reflected the Trump's recent comment. It's inevitable but not something we didn't expect. The current bear market is different from what we saw in December.”

Lee claimed unaccountable uncertainties have already been reflected in the nation's stock market so local stocks are likely to recover in the third quarter of the year.

“Trade tension between the U.S. and China was at its peak in December. We also had the Fed's rate issue. There were doubts about domestic chipmakers' earnings in the first quarter,” he said.

“They have been all cleared out except the U.S-China trade dispute. But this isn't something we never knew about. I believe there will be more opportunities than risks in the second half once Washington and China manage to settle the issue.”

Meritz Securities researcher Ha In-hwan agrees.

“Seoul stocks could drop further, but the fall won't be that sharp,” he said.

“Considering the current won-dollar exchange rate, foreign investors sustained a loss in the nation's stock market. So, they are now selling shares at a loss. I believe they will come back in the third quarter.”