54 Trillion Won Vanishes Just This Month Due to ‘3 Highs’
The KOSPI’s market capitalization, which had maintained the 2,000 trillion won (US$1.48 trillion) level since May, saw another sharp decline as it fell below 2,000 trillion won at the end of last month. The persisting “3 Highs” phenomenon – high interest rates, high oil prices, and a strong dollar – has continued to weigh on investor sentiment, resulting in a loss of over 54 trillion won just within this month.
According to the Korea Financial Investment Association on Sept. 26, the KOSPI market capitalization was recorded at 1,979.05 trillion won on Sept. 25. The KOSPI market capitalization, which had climbed to the 2,100 trillion won level on Aug. 1, began showing a downward curve and retreated to the 1,900 trillion won point after the middle of August.
Although it had rebounded to the 2,000 trillion won range since Aug. 28, it has been trending down to the 1,900 trillion won range since Sept. 21 in line with the recent weakness in the index. This also coincides with the timing of the U.S. Federal Reserve’s reaffirmation of a hawkish stance, stating it will maintain “higher for longer” interest rates shortly after the Federal Open Market Committee (FOMC) meeting in September.
This month, the KOSPI index has experienced a decline of more than 3 percent. This is attributed to the market’s waning expectations of interest rate cuts, coupled with surges in international oil prices and the value of the dollar, which have placed pressure on the overall stock market. A weakening Korean won also eliminates incentives for foreign investors to engage in domestic stock market investments.
Foreign investors are indeed exiting the domestic stock market. In the first 25 days of this month alone, foreign investors have net sold nearly 1 trillion won (US$740.74 million) in the equity market. Institutions and individuals made net purchases of 453 billion won and 134 billion won, respectively. However, it was insufficient to prevent the overall index from declining. Foreigners sold over 2 trillion won across the entire market.
Amid increasing market uncertainty, the trading value on the market has also dramatically declined. KOSPI’s trading value has fallen to the early 7 trillion won range. As of Sept. 25, the trading value stood at 7.46 trillion won, a whopping 80 percent decrease compared to the peak recorded on July 6 at 36.35 trillion won.