Defense, nuclear and financial stocks weak in succession…a tearful August

KOSPI retreats for the first time in 5 months

Hanwha Aerospace down 11% this month

Doosan Enerbility down 6%

KOSPI securities index also weak

Disappointment over tax reform holds back market

Trading value down by about 100 trillion won in a month

"September also expected to see continued volatility

Investment appeal of K-culture such as ramen and entertainment"

The KOSPI index oscillated within a box range and finished August with a negative return. This is the first monthly decline since March. Securities firms say it is highly likely that the domestic stock market will face volatility next month as well without gaining clear momentum. Because it is difficult to predict the index's direction, experts advise responding with sector-by-sector portfolios.

◇KOSPI index down 1.8% this month alone

On the 29th, the KOSPI index closed at 3,186.01, down 0.32%. It briefly rose above the 3,200 mark at the open due in part to the U.S. S&P 500 hitting a record high the previous day, but it failed to hold that strength. For the month of August, the KOSPI index fell 1.83%.

Major stocks on the Korea Exchange failed to show strength this month. Samsung Electronics, which had risen 33% through last month this year to reach the '70,000-won' level, fell 2.38% this month. The closing price that day was 69,700 won. Hanwha Aerospace, which reached 'emperor stock' status (1,000,000 won per share) at the end of last month, plunged 11.24% this month. Large-cap stocks on the Korea Exchange such as SK Hynix (-1.65%), LG Energy Solution (-7.97%), Samsung Biologics (-6.19%), and Doosan Enerbility (-5.95%) were all weak.

Financial and securities stocks that surged in the first half of the year showed similar weakness. The KOSPI financial index fell 0.08% this month, and the securities index fell 0.65%.

The KOSPI underperformed compared with major markets. Through the previous day of this month, the S&P 500 rose 2.56%. China’s Shanghai Composite rose 7.57%, Japan’s Nikkei 225 rose 4.28%, and Taiwan’s Taiex index gained 2.95%.

Trading value on the Korea Exchange also contracted. It was 169 trillion won in May, 288 trillion won in June, and 298 trillion won last month, but this month through the previous day it dropped sharply to 198 trillion won. That amounts to a reduction of about 100 trillion won in one month.

There are criticisms that government policies that fell short of market expectations have held back the market. "Disappointment over the tax reform plan, which triggered a more than 3% plunge on the first trading day of the month, still remains," said Han Ji-young, a researcher at Kiwoom Securities, "and particularly the adjustment pressure on previous leading stocks such as shipbuilding, defense industry, and nuclear power remains high."

◇"Possibility of continued uncertainty in September"

Securities firms generally expect that domestic stocks will face continued uncertainty next month as well. With the regular National Assembly session approaching, debates over tax reform such as the major shareholder capital gains tax threshold could continue. The short-term impact of U.S. tariffs is also expected to be difficult to confirm clearly. As a result, it will be difficult to forecast the earnings of major companies.

"If upcoming major economic indicators are stronger than expected and risk appetite in financial markets persists, the outlook for a U.S. rate cut in September could again become uncertain," said Seo Jeong-hoon, a researcher at Samsung Securities.

Statistically, the fact that the 'September market' has been weak raises investors' caution. According to Kiwoom Securities, since 2000 through last year, the KOSPI's average September fluctuation was only -1.0%.

Experts advise betting on medium- to long-term upside while keeping volatility in mind. "The narratives for previous leading sectors such as shipbuilding, defense, and nuclear power, and K-culture-related stocks such as ramen and entertainment are still valid," said Jung Seong-han, Chief Investment Officer (CIO) at Shinhan Asset Management, "but because the improvement comes from known positives leading to earnings gains rather than completely new drivers, one should not expect the same steep rallies as before." He added, "Since sectors are likely to show rotating flows, it seems better to increase weights during correction phases rather than chase prices during rallies."

Seon Han-gyeol / Jeong Won-woo, Hankyung TV reporters always@hankyung.com