Kospi tumbles more than 5% to close around 8,160; further losses eyed

Strong US jobs data reignites rate-hike fears; Philadelphia Semiconductor Index plunges 10%

Won-dollar rate tops 1,560; Jensen Huang's Seoul schedule continues; stock-specific moves expected

The Kospi and other market indicators are displayed on a board at Hana Bank's dealing room in Jung-gu, Seoul, on Friday. The benchmark index closed down 478.82 points, or 5.54 percent, at 8,160.59 that day. [Yonhap]
The Kospi and other market indicators are displayed on a board at Hana Bank's dealing room in Jung-gu, Seoul, on Friday. The benchmark index closed down 478.82 points, or 5.54 percent, at 8,160.59 that day. [Yonhap]

The Kospi is expected to face further losses Tuesday, pressured by a sharp drop in US semiconductor stocks and a rising won-dollar rate. Concerns about a Federal Reserve rate hike this year have resurfaced after stronger-than-expected US employment data, while the Philadelphia Semiconductor Index's plunge of more than 10 percent has rapidly cooled investor sentiment.

The Kospi closed Friday down 478.82 points, or 5.54 percent, at 8,160.59, after sliding as low as 8,038.10 during the session and threatening the 8,000 level. Foreign investors net sold 3.5387 trillion won ($2.34 billion) on the main bourse, extending their streak of consecutive net selling to 20 trading sessions.

Semiconductor stocks were among the hardest hit. Samsung Electronics fell 6.40 percent to close in the 320,000 won range, while SK Hynix tumbled 9.92 percent to slip into the 2 million won range.

US markets also suffered broad losses over the weekend, led by technology stocks. The Labor Department reported that nonfarm payrolls rose by 172,000 in May, far exceeding the market consensus of 80,000, reviving expectations that the Fed could tighten policy further.

The Dow Jones Industrial Average fell 1.35 percent, the S&P 500 dropped 2.65 percent, and the Nasdaq declined 4.18 percent. Nvidia slid 6.20 percent and Micron lost 13.25 percent, dragging the Philadelphia Semiconductor Index down 10.26 percent.

Interest rates and the exchange rate added to the pressure. The yield on the 10-year US Treasury note climbed above 4.5 percent, and the won-dollar rate breached 1,560 won during after-hours trading in Seoul's foreign exchange market. The MSCI Korea ETF, a gauge of foreign investor sentiment toward domestic equities, fell more than 14 percent.

Geopolitical tensions in the Middle East are also flaring again. US-Iran negotiations have stalled, armed conflict has continued near the Strait of Hormuz, and military tensions between Israel and Iran appear to be escalating once more.

Securities analysts say a near-term contraction in investor sentiment is unavoidable, but they believe key events scheduled this week could provide a catalyst for a rebound.

"We cannot overlook the psychological burden created by the chain reaction of sharp declines in domestic and overseas semiconductor stocks last Friday," said Han Ji-young, a researcher at Kiwoom Securities. "The key question is whether macro data, earnings results and supply-demand events during the week can provide the spark needed to restore the chilled investor sentiment."

Markets are watching the US May consumer price index, due Wednesday, as the most critical variable. Analysts say that since rate-hike fears stemming from the strong jobs data are already largely priced in, an on-consensus inflation reading could ease upward pressure on interest rates and temper the dollar's strength.

Oracle's earnings, scheduled for Thursday, are also in focus. Although Broadcom's weaker-than-expected guidance recently rattled AI-related stocks broadly, analysts say the risk of a major earnings shock from Oracle is limited given that market expectations have already been lowered.

Stock-specific trading is likely to continue, however. Nvidia CEO Jensen Huang met with SK Group Chairman Chey Tae-won on Sunday and was expected to follow up Monday with meetings involving SK Group, Samsung Electronics, Naver and Hyundai Motor Group. Markets expect that optimism over potential cooperation with Nvidia will continue to influence share price movements in semiconductor and AI-related stocks.

Han said the Kospi is likely to remain in a period of heightened volatility this week as it absorbs the fallout from the US market selloff, the direction of market interest rates following the CPI release, Oracle's earnings, the SpaceX listing, simultaneous futures and options expiration, and pressure from the won-dollar exchange rate. Han projected a Kospi trading range of 7,500 to 8,300 for the week.


hajun825@heraldcorp.com