Resumption of Short Selling Amid Trump Tariffs… "Responding to Volatility with Semiconductor Stocks" [Weekly Outlook]

NH Investment & Securities "KOSPI Expected to Range Between 2500~2650"

The securities industry forecasts that the domestic stock market will continue to show high volatility this week (March 31~April 4) due to the tariff policies of the Donald Trump administration in the United States. It is recommended to respond by focusing on the semiconductor sector, where foreign investor demand may concentrate following the announcement of tariff policies.

On the 30th, NH Investment & Securities projected the KOSPI range for this week to be between 2500~2650. With the detailed plan of the U.S. reciprocal tariffs set to be announced on the 2nd, there is an analysis that stock price volatility will increase if high tariff rates are applied to Korea.

President Donald Trump emphasized that there will be no exceptions to the tariffs, stating that reciprocal tariffs considering non-tariff barriers such as national value-added tax (VAT) will be applied. There is speculation that Korea might be included in the so-called 'Dirty 15', a group of countries with high non-tariff barriers. 'Dirty 15' is a term used by U.S. Treasury Secretary Scott Besant in a recent interview to refer to countries that impose significant tariffs on the U.S. and are targets for reciprocal tariffs. Although it accounts for only about 15% of all countries, it refers to countries that consistently run trade surpluses with the U.S.

Secretary Besant did not specify which 15 countries are included. However, the Wall Street Journal (WSJ) speculated that it is likely similar to the list published in the Federal Register by the U.S. Trade Representative (USTR) of countries showing 'trade imbalances with the U.S.'. This includes major countries such as the G20, the European Union, Australia, Brazil, Canada, China, India, Japan, and Korea.

Jae-won Lee, a researcher at Shinhan Investment Corp., stated, "Interest in the imposition of reciprocal tariffs continues," and predicted that "depending on the degree of tariff imposition, there will be a differentiated market trend among stocks within the sector."

The full resumption of short selling on the 31st is also pointed out as a factor that could increase market volatility. Short selling is an investment method where stocks expected to fall in price are borrowed and sold, and then bought back at a lower price to make a profit. The resumption of short selling for all stocks comes five years after it was completely banned in March 2020 due to the COVID-19 pandemic.

Na Jeong-hwan, a researcher at NH Investment & Securities, said, "In addition to the implementation of U.S. tariffs and the announcement of major economic indicators, uncertainties are expanding in the domestic stock market with the resumption of short selling and the continuation of policy vacuums," and predicted that "although volatility may be high depending on the event results, a strategy to increase the proportion of semiconductor stocks, where foreign investor demand may concentrate after uncertainties are resolved, will be effective."

However, there is also an analysis that the supply and demand environment of the stock market may improve after the resumption of short selling. IBK Investment & Securities pointed out that in the one-month period after the resumption of short selling, △banks △utilities △telecommunications △automobiles △retail sectors are likely to show relative strength. It is explained that they have favorable conditions from a valuation (price level compared to performance) and low volatility perspective.

Byun Jun-ho, a researcher at this securities firm, said, "The negative impact of the resumption of short selling on the market will be limited," and predicted that "although it may be a burden on some stocks or sectors targeted by short selling, the overall impact on the market will not be significant."

He continued, "The upward influence of long (buy) funds will be greater than the downward influence of short (sell) funds," and judged that "as short-term trading funds flow in, foreign participation in the market is likely to increase after the resumption of short selling, and the supply and demand environment may actually improve."

Reporter Go Jeong-sam, Hankyung.com jsk@hankyung.com