Index trims losses despite 3.8 trillion won foreign outflow and chip slump, with retail and institutional investors stepping in to support prices
The dealing room at Shinhan Bank on March 27. (Photo courtesy of Shinhan Bank)
The KOSPI index recovered most of its losses, buoyed by strong buying from retail investors, despite a massive sell-off of over 3.8 trillion won (approximately 2.53 billion) by foreign investors. Although the index was pushed down to the 5220-point level intraday, as concerns over a prolonged U.S.-Iran war coincided with a sharp drop in semiconductor stocks, retail investors led the buying charge, with institutions joining in to halt the decline. Going forward, external variables, such as the evolving atmosphere of the U.S.-Iran conflict, are expected to be an inflection point determining the stock market’s direction.
On March 27, the KOSPI index closed at 5438.87, down 0.40% from the previous day. Foreign investors net-sold 3.8774 trillion won, continuing their selling streak for the seventh consecutive trading day. Retail investors (+2.7121 trillion won) led the buying, and institutional investors (+778.6 billion won) also switched from selling to buying.
Lim Jeong-eun, a researcher at KB Securities, stated, “In the domestic market, a volatile session emerged as foreigners continued their massive net selling of over 3.8 trillion won in the KOSPI market,” adding, “The downside was defended by the net buying trend of retail investors.”
Indeed, retail investors are assessed as a market participant with a strong tendency to lead buying during stock price declines, aiming for short-term rebounds. Institutional buying can reflect not only proprietary trading by investors like pension funds but also spot purchases resulting from individual investments in Exchange-Traded Funds (ETFs).
Samsung Electronics fell to as low as 172,000 won intraday before closing at 179,700 won (-0.22%). Although it recovered most of its losses, this was the first time its closing price fell below 180,000 won in about half a month, since the 9th (173,500 won). SK hynix dropped to 880,000 won intraday before finishing at 922,000 won (-1.18%). On a closing basis, this was its lowest level since the 13th (910,000 won).
Concerns about a slowdown in memory demand, which spread after Google’s announcement of its AI (Artificial Intelligence) memory-lightening algorithm ‘TurboQuant’, negatively impacted domestic and international semiconductor stocks. However, some in the market believe this is not solely bad news for the semiconductor industry. The logic is that ‘Jevons’ paradox’ is anticipated, a phenomenon where total demand actually increases as the efficiency of a specific technology improves.
Experts believe the future direction of the stock market will be most heavily influenced by the situation in the Middle East. The U.S.-Iran conflict is currently marked by simultaneous signals of both an end to the war and the deployment of U.S. ground troops.
Lee Jae-man, a researcher at Hana Securities, said, “If the rise in international oil prices due to the U.S.-Iran war continues for more than two months, inflationary pressure in the U.S. and domestically will actually increase.” He added, “In this case, concerns about a base rate hike by the Fed (Federal Reserve) could also grow larger.”
However, researcher Lee also mentioned that raising interest rates could worsen the private credit problem in the U.S., stating, “The Fed will not rush to raise the base rate.”
Meanwhile, the KOSDAQ index closed at 1141.51, up 0.43%. Retail and institutional investors net-bought 170.1 billion won and 50.8 billion won, respectively, while foreign investors net-sold 234.0 billion won. The KOSDAQ opened lower but reversed to an upward trend.
In the Seoul foreign exchange market, the won-dollar exchange rate finished the day’s trading (as of 3:30 p.m.) at 1508.9 won, up 1.9 won from the previous session. The rate is maintaining a high level in the 1500 won range amid uncertainty from the Middle East war.
Yoon Young-sil
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