The KOSPI index and the won-dollar exchange rate are displayed on a monitor in the dealing room of Hana Bank in Seoul’s Jung district on the 4th. Yonhap News
The KOSPI, stuck in a trading range just short of reclaiming 7,000 points, is searching for room to rally against Middle East conflict and concerns over a U.S. interest rate hike. August employment data in the United States came in above market consensus, strengthening the case for a rate increase by the Federal Reserve. Still, with inflation data serving as the more decisive gauge, attention is turning to the producer price index (PPI) and consumer price index (CPI) readings due this week.
The KOSPI closed last week at 6,687.21, down 101.67 points, or 1.49%, from the previous week, according to the Korea Exchange on the 7th. The index climbed as high as 6,835.80 on the 1st in an attempt to retake the 7,000 level, but gave back more than those gains the following day with a 3.99% drop. Samsung Electronics (005930.KS), down 0.6%, and SK hynix (000660.KS), down 0.4%, the two pillars of KOSPI market capitalization, also edged lower from the prior week.
Large share buybacks by Samsung Electronics and SK hynix helped cushion the index, but heavier selling by major investor groups weighed more. Other corporations logged net purchases of more than 1 trillion won for 10 consecutive trading sessions from the 20th of last month, buying a cumulative 16.6598 trillion won worth of stock and establishing themselves as a core source of demand. Yet gains were limited as retail investors, foreign investors and institutions sold 5.864 trillion won, 9.2789 trillion won and 1.4731 trillion won worth of shares, respectively.
With concerns over a U.S. rate hike the main factor capping the KOSPI’s advance, a dramatic rebound is seen as unlikely this week as well. Chair Kevin Warsh delivered remarks last week at the Jackson Hole economic symposium hinting at a hawkish stance, while U.S. payrolls rose by 162,000 from the previous month, roughly three times the market forecast of 55,000. The Dow Jones Industrial Average fell 271.86 points, or 0.51%, from the previous session on the 4th.
The lack of any sign that the conflict between the United States and Iran is nearing an end is another factor adding downward pressure on the KOSPI. The index plunged to as low as 6,440 points intraday after reports that Iran had launched a drone attack on a U.S. military base in Kuwait on the 3rd of this month. Concerns over a prolonged conflict continue to be reflected in international oil prices. West Texas Intermediate (WTI) rose for a fourth straight session to $91.30 a barrel.
Market attention is focused on inflation data due this week. The U.S. August PPI and the European Central Bank’s monetary policy decision are set for the 10th, followed on the 11th by the U.S. August CPI and preliminary Korean export figures for the first 10 days of September. “Fed officials have made clear that inflation data matters more than anything else when they decide whether to raise rates,” said Huh Jae-hwan, an analyst at Eugene Investment & Securities. “A strong August employment report will remove one argument against a rate hike, but it will not change the Fed’s core logic itself.”
