KOSPI trading volume falls to 30-month low

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By Lee Kyung-min

The trading volume of Seoul stocks dropped to a 30-month low in July amid weak investor sentiment prolonged by growing uncertainties over trade disputes between the U.S. and China and between Korea and Japan, analysts said Sunday.

This is compounded by weaker-than-expected corporate earnings in the second quarter.

The benchmark KOSPI saw its daily average trading volume between July 1 and July 26 plunge to about 4.3 trillion won ($3.6 billion), the lowest in two and a half years since January 2017 when the amount was 4.1 trillion won.

July's figure is less than half of the 9.5 trillion won recorded in May 2018.

The stock plunge in late 2018 was triggered largely by the U.S.-China trade dispute, and adding to the woes is the fresh feud between Korea and Japan over the latter's export restrictions on key materials needed for the former to produce semiconductors.

The stagnant investment sentiment is likely to drag on, according to Yun Chang-hyun, an economist at the University of Seoul.

“Investors will see no major upward momentum for the time being,” he said.

“The recent trade dispute between Korea and Japan, coupled with the long-dragged-out spat between the U.S. and China, will hurt investment sentiment, already dampened by the sluggish economy,” he added.

The stock market, defined by high volatility and severe fluctuation, has little appeal to investors, an increasing number of whom are turning instead to safer assets such as gold and U.S. dollars, he said.

“The stock market has its strengths and weaknesses, and it seems it is not a time that investors are willing to brave the risks,” he said.

Bank of Korea data showed the U.S. dollar-denominated deposits at banks here jumped to $59.9 billion (70.5 trillion) in June, up $4.25 billion from a month earlier.

Korea's three leading commercial banks sold a combined amount of about 32.4 billion won worth of gold bars in the first half of 2019, a 91.5 percent increase from a year earlier.

Meanwhile, over a third of stocks listed on the Seoul bourse were held by foreigners as of July 26.

Korea Exchange said about 531 trillion won worth of stocks were owned by foreigners, accounting for 38.44 percent of the 1,383 trillion won KOSPI market.

The figure is the highest in 13 years since Aug. 24, 2006 when they held 38.49 percent, or 248 trillion won, out of 645 trillion won on the KOSPI market.

Foreign investors' recent buying spree, strikingly highlighted by the selloff of local individual and institutional investors, largely focuses on chip-related stocks, according to a market analyst.

“With the growing uncertainties, making a third quarter outlook is a hard task at this point,” a market analyst who declined to be identified.

“Some stocks saw their price rise despite earnings shock, and others suffered losses notwithstanding earnings surprises. The market will be dominated by uncertainty for a while,” he added.