Kospi Falls to 5,220 on US Inflation Shock; Kosdaq Rises More Than 1%

The Kospi fell on Nov. 11 as stronger-than-expected US inflation stoked concerns over additional interest-rate hikes, while the Kosdaq advanced on foreign buying.

As of 9:09 a.m., the Kospi stood at 5,225.06, down 14.07 points, or 0.27%, from the previous session. Profit-taking after the previous day's sharp rally weighed on the benchmark, though institutional investors capped the decline with net purchases of 61.3 billion won. Retail and foreign investors were net sellers of 27.1 billion won and 40.3 billion won, respectively. Advancers outnumbered decliners 566 to 222.

The Kosdaq was trading at 679.97 at the same time, up 12.36 points, or 1.85%. Foreign investors bought a net 14.5 billion won worth of shares, leading the gain, while retail and institutional investors were net sellers of 7.2 billion won and 6 billion won, respectively. Advancing issues totaled 1,196, far exceeding 375 decliners.

Higher-than-expected US inflation was the main burden on South Korean equities. US consumer prices rose 0.4% last month from a month earlier, while core CPI, which excludes food and energy, climbed 0.3%. Both readings beat market forecasts, underscoring the possibility of further Federal Reserve tightening. On Wall Street overnight, the Nasdaq fell 0.74%, the S&P 500 lost 0.38% and the Dow dropped 0.30%.

Investor caution intensified after Federal Reserve Governor Christopher Waller mentioned the possibility of a 50-basis-point rate increase in December. Still, Han Ji-young, an analyst at Kiwoom Securities, said the probability of a 50-basis-point hike next month was only 11% based on the FedWatch tool. With other Fed officials not explicitly backing a larger increase, the chances of another big step remain limited, Han said.

Weakness in US semiconductor shares also hurt sentiment. Concerns that controversy surrounding Nvidia Chief Executive Officer Jensen Huang could lead to tighter restrictions on semiconductor exports to China sent Nvidia down 5.47%. Micron and SanDisk fell 1.1% and 2.99%, respectively, while SK Hynix American depositary receipts slid 3.51%. The Philadelphia Semiconductor Index and the MSCI Korea ETF lost 0.36% and 2.05%, respectively.

Lower oil prices, however, helped ease some of the pressure on equities. Growing hopes for negotiations between the US and Iran pushed West Texas Intermediate crude futures to settle at $86.04 a barrel and Brent futures at $91.49. Both benchmarks ended at their lowest levels since late August.

Seo Sang-young, a managing director at Mirae Asset Securities, said concerns over additional US tightening and uncertainty over semiconductor regulations could trigger short-term profit-taking. But falling oil prices and a slower increase in US Treasury yields are supportive factors. Even if volatility rises ahead of options expiration, bargain buying is likely to limit the Kospi's losses, he added.