Market Weighs Sell in May Jinx As Retail and Institutions Absorb Flows, Backed by Solid First-Quarter Earnings Outlook
A KOSPI display board is seen in the dealing room at KB Kookmin Bank headquarters in Yeouido, Seoul, on April 30. (Photo provided by KB Kookmin Bank)
The KOSPI, which had heated up after breaking above 6,700 intraday for the first time ever last month, surrendered the 6,600 line on heavy foreign selling, signaling a pronounced wait-and-see mood for the stock market in May. With attention focused on whether the long-standing market adage of the sell in May jinx will reappear, a tense tug-of-war is expected to continue between fatigue from the recent sharp rally and solid corporate earnings.
According to the Korea Exchange on May 2, the KOSPI closed at 6598.87 on April 30, down 92.03 points, or 1.38%, from the previous trading day. The index had surged as high as 6750.27 during the session, appearing poised to set a new all-time high, but turned lower in the afternoon as a flood of sell orders hit the market.
Foreign investors, who had led April’s rally, were particularly influential in the sharp decline, recording net sales of 1.4559 trillion won ($1.05 billion) on the KOSPI market in a single day. Retail investors and institutional investors, by contrast, posted net purchases of 1.1824 trillion won ($851 million) and 283.8 billion won ($204 million), respectively, absorbing the supply, but that was not enough to halt the fall.
Earlier, retail investors had already moved to lock in profits on an unprecedented scale, unloading holdings worth the 15 trillion won range over the course of April. They had sold off major semiconductor leaders in large volume and bought inverse products that bet on declines, signaling concern that the market had reached a peak. With individuals having already raised substantial cash positions, and now even foreign investors — seen as the market’s last line of defense — turning to large-scale profit-taking, caution over the May market has intensified further.
Typically, May is a period when the first-quarter earnings season winds down and the market enters a sell in May phase, as a clear upward catalyst is lacking. On top of that, major macroeconomic events, including the inauguration of new U.S. Federal Reserve Chair Kevin Warsh scheduled for mid-May and the release of inflation indicators, are also cited as factors likely to weigh on investor sentiment.
Still, the securities industry believes excessive concern over sell in May is unnecessary, saying the KOSPI is likely to go through a correction in early May and then seek a rebound, showing a pattern of weakness in the first half and strength in the second half. The view is that solid first-quarter corporate earnings will serve as a strong safety net, weakening the rationale for further profit-taking.
Byun Jun-ho, a researcher at IBK Securities, analyzed, “In years when the KOSPI surged by 5% or more in April, there has never been a case where the KOSPI index fell in May,” and added, “It is necessary to leave open the possibility of a short-term correction due to technical burdens, but rather, a strategy of engaging in low-price buying during a technical pullback in early to mid-May is effective.”
Kim Yong-gu, an analyst at Yuanta Securities, also projected that “the continuation of the global artificial intelligence (AI) investment supercycle and the possibility of strong earnings at home and abroad as a result will support the domestic stock market’s trend of renewing record highs.”
Yoon Young-sil
댓글
0