KOSPI Retreats from Record Highs, Declines 1% Amid Market Uncertainty Ahead of Federal Reserve Meeting

The KOSPI index, South Korea's benchmark stock market index, saw its relentless streak of record-breaking gains come to a halt, posting a significant 1% decline on November 17 (local time). This follows six consecutive sessions of all-time highs, as heightened caution among foreign and institutional investors ahead of the U.S. Federal Open Market Committee (FOMC) meeting spurred a wave of selling activity.

KOSPI Index Pulls Back After Rally Peak

Data from the Korea Exchange shows that the KOSPI closed at 3,413.40, falling 36.22 points (1.05%) from the previous trading day. The session started on a subdued note with the index opening at 3,433.83, down 15.79 points (0.46%) from the prior close of 3,449.62. Selling pressure intensified throughout the day, deepening the losses.

This reversal came after the KOSPI hit a historic milestone on November 10, closing at a record 3,314.53 and surpassing the previous all-time high of 3,305.21 set on July 6, 2021. The index went on to achieve five consecutive record highs before the slump erased some of those gains.

Growing Market Caution Ahead of FOMC Decision

Market participants exhibited a cautious stance, adopting a wait-and-see approach in light of the imminent Federal Reserve meeting. The pullback was attributed to profit-taking activities by investors eager to lock in gains from the recent rally.

Individual investors on the KOSPI made net purchases totaling 250.2 billion won, attempting to counterbalance the selloffs by foreign and institutional investors, who offloaded shares worth 34.8 billion won and 305.4 billion won, respectively. These transactions collectively exerted significant downward pressure on the index.

Jaewon Lee, a researcher at Shinhan Investment Corp., remarked, “The market is in a consolidation phase after a robust 11-day rally, largely underpinned by strength in the semiconductor sector.”

Mixed Performance Across Leading Stocks

Among the KOSPI’s blue-chip stocks, market leaders displayed divergent performance. Heavyweights like Samsung Electronics and SK Hynix, which previously fueled the index’s rally, fell by 1.51% and 4.17%, respectively. This steep retreat in semiconductor stocks was largely linked to profit-taking after their strong upward momentum in recent sessions.

In contrast, sectors lagging in previous market rallies showed resilience. Financial and heavy industry stocks, including KB Financial Group (up 0.42%) and HD Hyundai Heavy Industries (up 0.60%), managed to record modest gains. “The semiconductor sector decline is indicative of profit-taking,” Lee added, “while previously underperforming industries like automobiles, telecommunications, and cosmetics showed relative stability.”

KOSDAQ Index Mirrors KOSPI Decline as Tech Stocks Tumble

The KOSDAQ, South Korea’s secondary stock market index, followed the KOSPI’s downward trajectory, closing at 845.53. This marked a 6.31-point (0.74%) decline from the prior session. The index opened slightly lower at 850.15, down 1.69 points (0.20%) from the previous close of 851.84, before sliding further.

As seen in the KOSPI, individual investors on the KOSDAQ remained net buyers, accumulating 320.7 billion won worth of shares. However, foreign and institutional investors continued to liquidate holdings, selling 186 billion won and 120.9 billion won of stocks, respectively.

Most top-performing KOSDAQ-listed market-cap stocks suffered losses. Notable decliners included Alteogen (-4.06%), Peptron (-3.34%), and LIG Nex1 (-2.19%). However, a few stocks bucked the trend, including EcoPro (up 1.12%) and HLB (up 0.39%).

Korean Won Weakens Amid Dollar Strength

The foreign exchange market also reflected heightened caution as the Korean won depreciated against the U.S. dollar. The won-dollar exchange rate ended at 1,380.1, marking an increase of 1.2 won from the previous day’s close of 1,378.9.

Currency movements suggest investor wariness of potential surprises in U.S. monetary policy. The upcoming Fed meeting is a major focus, with the market awaiting cues on interest rate adjustments and broader monetary direction. Analysts expect heightened volatility in South Korean stock and currency markets to persist in the near term as uncertainty remains the central theme.

Conclusion: Market Consolidation Amid Uncertainty

The recent pullback in the KOSPI and KOSDAQ reflects a broader market consolidation phase following an extended rally. The mix of profit-taking and investor caution ahead of the Federal Reserve meeting has added downward pressure to both indices. As semiconductor stocks lose momentum, underperforming sectors are showing signs of recovery, while the weakening won highlights broader macroeconomic uncertainty. Investors are closely monitoring developments from the FOMC to gauge the potential impact on global financial markets, with the outlook for the South Korean market hinging on these critical policy decisions.