Kospi Declines Following Record Highs Amid Market Anticipation for Federal Reserve Meeting

South Korea's Kospi index, which recently notched record highs over five consecutive sessions, has entered a slight decline as traders anticipate the upcoming U.S. Federal Open Market Committee (FOMC) meeting. This pullback is widely regarded as a phase of profit-taking following the rapid gains seen in recent trading days.

As of 9:25 a.m. on November 17, the Kospi fell by 29.38 points (0.85%) to 3,420.24, lower than the previous close, according to the Korea Exchange. Opening at 3,433.83—a drop of 15.79 points (0.46%) from its previous all-time high close of 3,449.62—the index saw losses deepen throughout the morning.

The Kospi’s recent record-breaking run began on November 10, when it closed at 3,314.53, surpassing the prior all-time high of 3,305.21 set on July 6, 2021. Over the next five trading days, the index sustained its upward surge, reaching daily record closes before this week’s cooling-off period.

Investor Sentiment Driven by Federal Reserve Meeting Concerns

The cautious mood among investors ahead of the Federal Reserve’s impending FOMC meeting is playing a pivotal role in the Kospi’s minor retreat. Analysts suggest this pause is a combination of profit-taking pressures and market apprehensions regarding the direction of future monetary policy.

Han Ji-young, a researcher at Kiwoom Securities, noted, “Investor sentiment is being shaped by the Federal Reserve’s policy outlook. The U.S. markets recorded marginal declines amid these uncertainties, and similar trends are influencing domestic investors. The Kospi’s swift surge has amplified profit-taking incentives, leading to short-term market volatility.”

Diverging Market Dynamics: Individuals Support While Foreigners Sell

Market dynamics during the morning session reflected contrasting actions among different investor groups. Individual investors emerged as net buyers, acquiring 270.4 billion won worth of shares, helping to stabilize the market. Conversely, foreign and institutional investors were net sellers, offloading 222.9 billion won and 28.8 billion won worth of shares, respectively.

Sectoral performances within the Kospi exhibited mixed results. Transportation equipment & components (0.10%), telecommunications (0.52%), and real estate (0.26%) showed gains. However, sectors such as construction (-2.58%), securities (-2.51%), and manufacturing (-1.06%) experienced declines.

Among large-cap stocks, movements were similarly varied. Samsung Electronics, a market bellwether, fell 2.14%, while its semiconductor peer SK Hynix dropped 2.73%. Hanwha Aerospace also declined 1.34%. On the positive side, Hyundai Motor inched up 0.47%, and KB Financial Group gained 0.08%. HD Hyundai Heavy Industries, meanwhile, remained flat.

Kosdaq Index Mirrors Overall Decline

The Kosdaq index, which tracks mid- and small-cap stocks, also declined, falling 4.25 points (0.50%) to 847.59. Opening at 850.15, the index lost momentum as the morning progressed.

Similar to the Kospi, individual investors in the Kosdaq market acted as net buyers, purchasing 87.1 billion won worth of shares. However, foreign and institutional investors opted to sell, with net sales of 62.8 billion won and 33.6 billion won, respectively.

Sector-wise, Kosdaq exhibited broader weakness, with most sectors finishing in negative territory. Notable losses were seen in metals (-1.11%), machinery & equipment (-1.01%), and telecommunications (-1.34%). Only transportation equipment & components (0.13%) and entertainment & leisure (0.64%) managed minor gains.

Among Kosdaq’s large-cap stocks, declines were prevalent. Pharmaceuticals such as Alteogen (-1.32%) and PharmaResearch (-1.91%) retreated, while Ecopro and Samchundang Pharm ended the session flat. The sole gainer of note was ABL Bio, which advanced slightly by 0.10%.

Currency Market: Korean Won Shows Modest Strength

In the currency market, the Korean won demonstrated slight appreciation against the U.S. dollar. The won opened at 1,378.0 per dollar, strengthening by 0.9 won compared to the previous session’s closing price of 1,378.9 won.

As currency traders and equity markets keep a close eye on domestic and global developments, the Federal Reserve’s forthcoming policy guidance on inflation and interest rates remains a critical focal point. Investors will continue to parse signals for a clearer understanding of the economic trajectory ahead.

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