Market Loosing Steam
As the stock market has continued to show an unexpectedly choppy trading, investors shrunk as well. The amount of transactions hit its lowest for the year and the balance of credit loan, which is an indicator of activity on the stock market, is on the decrease.
According to the Korea Exchange (KRX) on July 1, the amount of transactions on the main KOSPI bourse in June stood at 143.22 trillion won (US$128.51 billion). The figure is the lowest for the year, except for 123.96 trillion won (US$111.23 billion) in February when stock prices showed a steep decline. Compared to 181.07 trillion won (US$162.46 billion) in May, the figure dropped as much as 21 percent. The amount of transactions on the secondary KOSDAQ market also came to 93 trillion won (US$83.45 billion), reaching the lowest level for the year. Its monthly transactions totaled 190 trillion won (US$170.48 billion) in January due to market expectations for KOSDAQ market promotion policies, but the figures dropped by half.
The amount of credit loan also decreased to some 11 trillion won (US$9.87 billion) in two months. As the figure increased to 12.65 trillion won (US$11.35 billion) on June 12, reaching an all-time high, it dropped to some 11 trillion won (US$9.87 billion) on June 22 and then to 11.91 trillion won (US$10.69 billion) on June 27. .
This is because the stock market has continued to be bearish due to the trade dispute between the US and China and exchange rate fluctuations. Jeong Hyun-jong, an analyst from Korea Investment & Securities Co., said, “It is hard to revive the investment sentiment due to the trade dispute between the US and China and the strong dollar. We have the Q2 performance season ahead, but the fact that it is still unclear whether or not there is improvement in performance imposes a strain on the stock market.”
The KOSPI index fell below the 2,300 level on June 29 for the first time in 13 months, being caught in the mire of stagnation. There is a striking stagnation regardless of the size of business or the type of business. Large-cap stocks on the KOSPI market saw their prices drop 2.8 percent last month, while mid-cap stocks and small-cap stocks decreased by 5.4 percent and 9.9 percent, respectively. Starting with the electrical and electronic industries, which account for a majority of the market, most industries showed a decrease. On the other hand, the food and beverage industry, which is for domestic demand, saw its prices go up 4.3 percent in June, while the textile and clothing industry and the service industry increased 1.8 percent and 1.5 percent, respectively.
The problem is that it is extremely difficult to predict the future. Since external variables, like the move of Chinese and US governments, shake the stock market, instead of fundamentals, such as economic indicators and business performance, even stock experts said, “The stock trends are too hard to predict to the extent that all the projections turned out to be wrong.”
Under the current situation, all eyes are on an inflection point in the future. The US’ first implementation for tariffs on July 6 will determine the direction of the trade dispute. The US is planning to impose a 25 percent tariff on 818 items imported from China.