The U.S. bull market has strongly pushed up the global stock market, including South Korea. It seems that investors' attitude toward risk assets has improved as the U.S. Federal Reserve (Fed) implied that it would cut its benchmark interest rate again. There are still concerns over Japan’s export curbs against South Korean companies, but foreign investors have been buying up Samsung Electronics Co. and SK Hynix Inc., leading the rise in stock prices.
The Korea Composite Stock Price Index (KOSPI) closed up 1.06 percent on July 11 at 2,080.58. This came after Fed Chairman Jerome Powell reconfirmed his dove stance, which meant quantitative easing, on July 10 (local time).
Many speculated that the Fed may not lower the benchmark interest rate due to the good U.S. employment data. However, there are strong signs of an additional benchmark interest rate cut at the end of this month, which boosted the domestic stock market. Foreigners net bought 363.60 billion won (US$309.76 million) worth of shares on the main KOSPI market. In particular, they purchased mainly Samsung Electronics stocks worth 180 billion won (US$153.19 million) and SK Hynix shares worth 75 billion won (US$63.83 million).
Foreign investors purchased Samsung Electronics for 13 trading days in a row since June 25, raising their stake in the firm to 57.60 percent, the highest this year. Samsung Electronics presented its sluggish preliminary earnings for the second quarter on July 5 and saw its share price drop as much as 2.74 percent on July 8. However, the company’s share price rose for three consecutive days since July 9, driven by strong foreign buying.
In addition, foreign investors had bought SK Hynix shares since June 24, except for two trading days. Its stock price also surged 12.01 percent for three days after July 9.
There has been an increasing preference for risk assets due to expectations for liquidity expansion, and Japan’s export curbs have rather pushed up share prices in the semiconductor sector. Notably, an increasing number of market experts are coming with rosy prospects for SK Hynix. Park Yoo-ak, an analyst at Kiwoom Securities, said, “DRAM production is expected to be reduced due to Japan’s recent export regulations. Such a move, combined with excessively lower market expectations, will lead to an upward trend in stock prices, as we have seen early this year."