Kospi Drops 2.6% on Fed Rate-Hike Fears, Clouding Return to 7,000
Forecast Trend Report by Period
The Kospi slid more than 2% early Aug. 31 after hawkish comments from Federal Reserve Chair Kevin Warsh and a rise in long-term US Treasury yields fueled risk aversion, pushing the benchmark further from the 7,000 mark.
According to the Korea Exchange, the Kospi opened at 6,613.58, down 2.58% from the previous session. The decline persisted, with the index trading around 6,590 as of 9:10 a.m.
Foreign and institutional investors drove the selloff. As of 9:10 a.m., foreigners were net sellers of 196.5 billion won of shares on the main board, while institutions sold a net 102.7 billion won. Retail investors bought a net 262.2 billion won.
Semiconductor shares led the decline. Samsung Electronics fell more than 3%, while SK Hynix and SK Square each dropped more than 3%. Samsung Electro-Mechanics and Doosan Enerbility lost more than 4%, and Samsung Biologics fell more than 2%. Other heavyweight stocks, including Samsung Life Insurance, Samsung C&T, Hyundai Motor, HD Hyundai Heavy Industries, Celltrion and SK Inc., also traded lower. LG Energy Solution and KB Financial Group were little changed.
By sector, machinery and equipment and construction each fell about 4%. Electronics, manufacturing, securities, finance and insurance also weakened. Mid- and small-cap stocks declined alongside large caps.
The domestic market took its cue from weakness in US technology shares on Aug. 28. The Philadelphia Semiconductor Index plunged 3.47%, while the Nasdaq Composite closed down 0.52% at 26,402.42. The S&P 500 fell 0.25% to 7,711.76, and the Dow Jones Industrial Average slipped 0.02% to 53,559.99.
Expectations for higher US rates strengthened after Warsh's Jackson Hole speech. He said recent personal consumption expenditures and consumer price index data were better than expected, but it was difficult to conclude that the underlying inflation trend had improved in a meaningful way. After the remarks, market-implied odds of a Fed rate increase in September rose to about 59% from the mid-30% range.
Higher long-term Treasury yields weighed on technology shares, particularly chipmakers. Uncertainty over US semiconductor tariffs and export controls, along with competitive concerns tied to the growth of Chinese DRAM maker ChangXin Memory Technologies, or CXMT, also emerged as investment variables for the sector.
This week brings a series of events that could affect whether the Kospi can reclaim 7,000. In the US, August nonfarm payrolls data and the Institute for Supply Management's manufacturing purchasing managers index are due. In South Korea, investors will be watching August export data and subsequent foreign buying in semiconductor stocks.
Broadcom is due to report earnings early on Sept. 3. Investors are focused on revenue growth in AI accelerators and networking, as well as the company's AI revenue guidance. After Nvidia reported results and guidance that beat market expectations, Broadcom's earnings are also being watched as a key driver for semiconductor shares in South Korea and globally.
