Samsung Electronics Strike Risk and U.S. Yield Surge Weigh on Market
The KOSPI and the won-dollar exchange rate are displayed in the dealing room at the Kookmin Bank headquarters in Jung-gu, Seoul, on April 20.
The KOSPI fell for a second consecutive session on May 20, closing just above the 7,200 line as a combination of domestic and overseas headwinds weighed on the market, including the risk of a general strike at Samsung Electronics and a sharp surge in U.S. Treasury yields.
The KOSPI ended the session down 62.71 points, or 0.86%, at 7,208.95. The index opened higher, gaining 52.86 points, or 0.73%, to 7,324.52 in early trade, but quickly reversed course and at one point was pushed as low as 7,053.84, threatening to breach the 7,000 mark.
A wave of profit-taking following recent short-term gains, rising government bond yields in the United States and globally, and news that Samsung Electronics, which accounts for 27% of the KOSPI’s total market capitalization, was moving toward a general strike all weighed heavily on investor sentiment, producing an extreme intraday swing of 270.68 points between the session’s high and low.
Breaking down by investor type, foreigners were net sellers of 2.9482 trillion won (approximately $1.96 billion) worth of shares, extending their selling streak to 10 consecutive trading days. This marks the second-longest sustained selling run of the year, trailing only the 11-session streak recorded between March 19 and April 2.
In contrast, retail investors and institutions were net buyers of 1.7106 trillion won and 1.1052 trillion won, respectively, absorbing the supply. Notably, retail investors also logged their 10th consecutive session of net buying, setting a new record for the longest buying streak of the year. In the KOSPI 200 futures market, foreigners and retail investors were net sellers of 346.5 billion won and 28.1 billion won, respectively, while institutions were net buyers of 396.6 billion won.
Samsung Electronics sat at the center of the day’s market turbulence. After labor and management at the company failed to reach a compromise and formally moved toward a strike, investor anxiety rippled across the broader market.
Samsung Electronics plunged as much as 4.36% at one point during the session following the strike announcement, but clawed back its losses after the presidential office expressed regret and urged both sides to reach a last-minute agreement, ultimately closing up 0.18% at 276,000 won. SK Hynix finished unchanged from the previous session at 1,745,000 won.
Concerns over monetary tightening in the United States also acted as a headwind. On May 19 (local time), the yield on the U.S. 30-year Treasury note climbed as high as 5.197% during the session, its highest level since 2007, while the 10-year yield also rose to 4.687%.
Adding to the pressure, all three major U.S. equity indices closed lower ahead of the scheduled release of Federal Open Market Committee (FOMC) minutes on May 20 (local time), as expectations for additional Federal Reserve (Fed) rate hikes gained momentum.
Among KOSPI large-cap stocks excluding Samsung Electronics and SK Hynix, performance was mixed. SK Square (up 0.88%), Samsung Electro-Mechanics (up 7.50%), and HD Hyundai Heavy Industries (up 6.35%) reversed to gains in the final stretch of trading, while Hyundai Motor (down 1.99%) and LG Energy Solution (down 3.88%) declined.
By sector, nearly all segments fell, including telecommunications, which had risen early in the session but ended down 0.36%, with only the banking sector finishing flat. Utilities (down 5.13%), metals (down 4.66%), and securities (down 4.48%) posted the steepest losses.
The KOSDAQ index also closed lower, falling 28.29 points, or 2.61%, to 1,056.07. Although foreigners were net buyers of 203.0 billion won, retail investors and institutions sold a net 57.3 billion won and 130.9 billion won, respectively, dragging the index down.
In the Seoul foreign exchange market, the won-dollar exchange rate ended the weekly session at 1,506.8 won per dollar as of 3:30 p.m., down 1.0 won from the previous session.
The 10-session selling streak by foreign investors on the KOSPI has been cited as a direct driver of dollar strength. When foreigners sell Korean equities, they sell won and buy dollars in the process of repatriating funds, pushing the exchange rate higher.
Since the start of the year, foreigners’ cumulative net selling on the KOSPI has approached 90 trillion won, with cumulative net selling over the nine trading sessions through the previous day reaching 42 trillion won.
More fundamentally, analysts say the sharp rise in long-term U.S. Treasury yields is driving capital outflows from the domestic financial market, which is classified as an emerging economy. With persistently high oil prices fueling dollar strength, the U.S. 10-year Treasury yield has climbed to 4.67% and the 30-year yield to 5.18%.
Lee Min-hyeok, an economist at KB Kookmin Bank, noted that “while the scale of foreign net selling is unprecedented compared with any previous year, it is to some extent a natural phenomenon, as the growth in KOSPI market capitalization has been accompanied by an increase in the total balance of shares held by foreigners.”
However, he cautioned that “the concern is the likelihood of this pattern repeating going forward,” adding that “the larger the Korean equity market performs, the larger the foreign position grows, and there is a risk that any external shock could trigger a massive unwinding of those positions alongside a sharp surge in dollar demand.”
Yoon Young-sil
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