Kospi Declines on Profit-Taking After Record Surge Post Fed Rate Cut

The Kospi, South Korea’s flagship stock index, experienced a downturn on October 19 as foreign and institutional investors engaged in profit-taking following its recent record-breaking streak fueled by the U.S. Federal Reserve's rate cut decision. After hitting a historic high earlier in the month, the index retreated to the 3,440-point level, marking a pause in its upward momentum.

According to the Korea Exchange, the Kospi closed at 3,445.24, down 16.04 points or 0.46% from the previous session. The trading day was marked by fluctuations; the index opened slightly lower at 3,461.23 and expanded its losses throughout the session.

Rally Loses Steam After Record Streak

The Kospi had achieved an all-time high of 3,314.53 on October 10, comfortably surpassing its previous record of 3,305.21 set on July 6, 2021. Buoyed by the Federal Reserve's unexpected decision to cut interest rates, the index maintained five consecutive sessions of gains, driven by optimistic investor sentiment.

As the Federal Open Market Committee (FOMC) regular meeting drew closer, however, the rally diminished. Analysts attributed the tapering momentum to investor fatigue after sustained gains and increased profit-booking activity. The index rebounded briefly following the rate cut announcement but struggled to maintain its momentum in the face of mounting selling pressure.

Retail Investors Counter Selling Pressure from Institutions

Retail investors played a significant role in cushioning the Kospi amid the profit-taking wave. Individual investors purchased 73 billion won ($730 million) worth of equities during the session, demonstrating confidence in the market. However, this was outweighed by substantial selling by foreign and institutional investors, who offloaded 390.4 billion won and 412.9 billion won worth of shares, respectively.

In terms of market performance, SK Hynix managed to hold steady, closing unchanged at 353,000 won. Meanwhile, Samsung Electronics, which recently drew attention for hitting a valuation milestone as the "8-million-won electronics" company, fell 0.99%, closing at 79,700 won.

Semiconductor Sector Faces Challenges Amid Trade Uncertainty

The semiconductor sector, traditionally a cornerstone of South Korea's stock market strength, showed signs of cooling as profit-taking intensified. Jae-Won Lee, senior analyst at Shinhan Investment Corp., noted, “The overheated semiconductor sector is facing selling pressure against a backdrop of limited progress in tariff negotiations. Investors appear cautious, awaiting clear signs from trade talks and third-quarter corporate earnings.”

Lee further advised that future market movements hinge on the outcomes of trade discussions and quarterly earnings reports. He encouraged investors to prioritize companies with strong revenue growth projections.

Kosdaq Gains Broaden While Investor Roles Shift

On the secondary stock exchange, the Kosdaq delivered modest gains, climbing 6.00 points or 0.70% to close at 863.11. After starting the day at 858.08 and adding 0.97 points or 0.11%, the index built momentum as trading proceeded.

Investor activity diverged sharply on the Kosdaq, with retail investors net selling 219.9 billion won worth of shares. In contrast, foreign investors and institutions took net buying positions, acquiring 218.2 billion won and 64.2 billion won worth of equities, respectively.

Notable gainers included ABL Bio, which surged 7.98%, Rainbow Robotics, up 4.73%, and LigandBio, which gained 3.86%. On the losing side, EcoProBM dropped 3.34%, followed by EcoPro falling 1.68% and PharmaResearch declining 1.81%.

Korean Won Weakens Against Dollar

Currency markets reflected additional pressure on South Korea's economy, with the Korean won weakening against the U.S. dollar. The Seoul foreign exchange market reported the won ending the session at 1,393.6 per dollar, marking a 5.8-won increase from the previous close at 1,387.8 won.

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