“Growing concerns over possible delay in the economic recovery, mostly because of the outbreak of the Delta variant, are cited as the primary reason for the recent falls on Wall Street. It seems likely investors will rush into profit taking for stocks that have risen sharply in the past few months,” said Han Ji-young, an analyst at Kiwoom Securities.
Regarding the possibility that major foreign investors could rearrange their investment portfolios because of the “co-existence” in terms of inflation worries and the below-expected economic growth rate, a portfolio manager in Seoul said, “Korean stock markets will see some corrections. But the correction period shouldn’t be much longer as there are likely to be brisk earnings reports from major companies in the United States and South Korea.”
Foreign investors have a stronger preference for shares of Samsung, SK, LG and Hyundai Group because these conglomerates have global top-tier semiconductor, battery and vehicle-manufacturing affiliates under their wings. During a recent announcement of their preliminary earnings guidelines for the prior three months on June 30, Samsung Electronics and LG Electronics reported higher-than-expected earnings. Hyundai Motor and POSCO also forecast brisk earnings reports for the latest quarter, according to each company.
But the manager said he advised his clients to flee to bonds as a risk hedge. “Investors have greater worries that global economic recovery momentum could lose steam. But again, despite the spread of the Delta variant, the fundamentals of Korea’s top exporters are solid,” he said.
Due to the nature of the highly contagious delta variant, airline and energy stocks have been hit especially hard. On Tuesday, stocks extended their losing streak to a third consecutive session, following a U.S. stock plunge. The benchmark KOSPI retreated 11.34 points, or 0.35 percent, to close at 3,232.7 points. Trading volume was moderate at about 963 million shares worth some 15.1 trillion won ($13.1 billion), with losers outnumbering gainers 680 to 192.
Foreigner investors sold a net 181 billion won, while retail investors bought 38 billion won. Institutions purchased a net 152 billion won. Samsung Electronics closed unchanged at 79,000 won, and No. 2 chipmaker SK hynix retreated 0.42 percent to 118,500 won. Portal giant Naver moved down 0.9 percent to 439,000 won, and leading carmaker Hyundai Motor edged down 0.22 percent to 227,000 won.