KOSPI Rebounds as Retail Investors Drive Gains Amid Optimism on U.S. Rate Cuts

The KOSPI index experienced a notable rebound on October 18, supported by robust retail buying and renewed optimism surrounding the U.S. Federal Reserve's recent interest rate cuts. Following a historic rally and brief correction, market sentiment improved as macroeconomic developments signaled further growth potential.

Strong Start: KOSPI Resumes Upward Momentum

As of 9:20 a.m. KST, the KOSPI climbed 17.33 points (0.51%) to reach 3,430.73, compared to the previous day's closing value of 3,413.40, according to data provided by the Korea Exchange. The index opened strong at 3,432.77, marking a gain of 19.37 points (0.57%), maintaining its upward trajectory throughout the morning session.

Historic Highs and Interest Rate Catalysts

Earlier in the month, on October 10, the KOSPI achieved a record closing high of 3,314.53, surpassing the previous peak of 3,305.21 set on July 6, 2021. This rally extended for five consecutive sessions before moderating ahead of the Federal Open Market Committee (FOMC) meeting. The subsequent decision by the FOMC to lower the benchmark interest rate provided a fresh catalyst for recovery, enabling the market to regain momentum on October 18.

Han Ji-young, a research analyst at Kiwoom Securities, observed, “Despite apprehensions regarding potential internal discord within the FOMC, the meeting concluded without disruptive surprises. While some hawkish comments briefly influenced U.S. markets, the overall sentiment remained stable, contributing to mixed yet steady performance.”

Retail Investors Propel Market Gains

Retail investors played a pivotal role in the KOSPI's rebound, emerging as net buyers with total purchases amounting to 146 billion won. In contrast, foreign investors and institutional investors sold off shares worth 90.6 billion won and 48.7 billion won, respectively, reflecting a divergence in investment strategies.

From a sectoral standpoint, transportation equipment and components (0.05%), retail (0.79%), and telecommunications (0.26%) demonstrated positive movement. However, declines were observed in the medical precision equipment sector (-0.30%) and the transportation and warehousing sector (-0.77%).

Notable Stock Performances

Major stocks presented a mixed performance during the trading session. Samsung Electronics advanced by 1.02%, while SK Hynix outperformed with a substantial rise of 3.75%. HD Hyundai Heavy Industries also saw moderate gains, higher by 0.58%. On the other hand, Hyundai Motor remained flat, and Hanwha Aerospace slipped marginally by 0.29%.

Han Ji-young commented, “After a sharp rally in September, the market is likely to experience short-term volatility due to seasonal factors and profit-taking. Nevertheless, the overall trend remains upward, bolstered by the impact of U.S. rate cuts, stronger profit momentum in key industries such as semiconductors and defense, and optimism stemming from the proposed Third Commercial Act amendment.”

KOSDAQ Index Rises Alongside KOSPI Gains

The KOSDAQ index, tracking South Korea's smaller-cap stocks, also posted gains on October 18. The index was trading at 851.75 by mid-morning, up 6.22 points (0.74%) from its prior close of 845.53. It opened higher at 851.94, registering a 6.41-point (0.76%) increase.

Unlike the KOSPI, retail investors were net sellers on the KOSDAQ market, offloading shares worth 6.4 billion won. Conversely, foreign investors and institutional investors emerged as key buyers, with respective net purchases of 19.2 billion won and 700 million won.

Sectoral Highlights on KOSDAQ

Strong performances were seen in the general services (2.04%), construction (1.02%), and machinery equipment (1.23%) sectors. Conversely, declines were noted in the finance (-0.24%), textiles and apparel (-0.24%), and publishing media (-0.39%) categories, reflecting a segmented market response.

Large-Cap Stocks Show Varied Performance

Large-cap stocks on the KOSDAQ delivered mixed results during the session. EcoProBM dipped 0.74%, while EcoPro also declined by 0.60%. In contrast, Alteogen advanced 2.43%, Rainbow Robotics climbed 2.63%, LIG Nex1 surged 3.13%, and Peptron gained 1.73%.

FX Market Update: Korean Won Dips Marginally

In the foreign exchange market, the Korean won demonstrated minimal movement against the U.S. dollar. The currency opened at 1,380.0 won per dollar, marking a slight decrease of 0.1 won from the previous day's closing price of 1,380.1.

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South Korea's equity markets demonstrated resilience, buoyed by retail buying and supportive macroeconomic signals. With U.S. interest rate cuts rekindling risk-on sentiment, the KOSPI and KOSDAQ are positioned to navigate near-term volatility while maintaining their upward trajectories.