KOSPI Slips as Retail Investors Take Profits, Won Surges Most in 3 Years
South Korea's KOSPI index fell, snapping a 3-day winning streak, due to profit-taking by retail investors. In contrast, the Korean won surged by the most in 3 years after government intervention.
A classic split decision hit South Korea's financial markets. While retail investors cashed in on recent gains, pushing the stock market lower, the Korean won staged its most dramatic rally in over three years following a strong warning from foreign exchange authorities. The benchmark Korea Composite Stock Price Index (KOSPI) closed down 8.7 points, or 0.21%, at 4,108.62 on Wednesday, snapping a three-day winning streak.
Retail Sells, Foreigners Buy
The dip in the KOSPI was driven by local retail investors, who offloaded a net 717.5 billion won to lock in profits from recent rallies in tech and shipbuilding shares, according to Yonhap News Agency. This selling pressure was absorbed by foreign and institutional investors, who continued their buying spree, purchasing a net 520 billion won and 200 billion won, respectively. Total trade volume was moderate at 351.5 million shares worth 11.95 trillion won (US$8.2 billion).
Won Soars on 'Verbal Intervention'
In stark contrast to the equity market, the Korean won surged against the U.S. dollar. It closed at 1,449.8 won to the greenback, a jump of 33.8 won from the previous session—its biggest single-day gain in over three years. The sharp appreciation came after FX authorities stated that an excessively weak won was "not desirable" and signaled their "strong commitment" to stabilize the market. This intervention comes as the currency has been hovering near a 16-year low in recent weeks.
Mixed Fortunes for Major Stocks
Performance among blue-chip stocks was mixed. Tech giant Samsung Electronics lost 0.36%, but its chipmaking rival SK hynix edged up 0.68%. Automakers had a positive day, with Hyundai Motor gaining 0.7% and Kia climbing 0.68%. However, major shipbuilders, which had rallied previously, lost significant ground. Hanwha Ocean slipped 3.57%, and HD Korea Shipbuilding dipped 3.7%.
The KOSPI turned lower despite the continued purchase of foreigners and institutions as retail investors moved to take profit from shares that were recently bullish. The FX volatility also sapped investors' risk appetite.
Volatility in currency markets and divergence among investor groups can increase market uncertainty. Investment decisions should be based on careful analysis and risk assessment.
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