One day before the 21st presidential election, a cautious sentiment emerged in the domestic stock market. It appears that many investors were mindful of uncertainties regarding economic policy after the election, U.S.-China trade negotiations, and economic indicators.
On the 2nd, the KOSPI index closed at 2,698.97. It rose by 1.3 points (0.05%) compared to the previous transaction day. Although the index closing hovered around stability, there was a significant gap between the intraday high (2,719.87) and low (2,685.14). In the KOSPI market, foreigners and individuals net purchased 123.9 billion won and 98.7 billion won, respectively. Institutions had a net selling of 240.2 billion won.
The KOSDAQ index finished at 740.29, up 5.94 points (0.81%) from the previous transaction day. In the KOSDAQ market, foreigners led the index rise with purchases amounting to 111.6 billion won. Institutions net bought 14.4 billion won, while individuals net sold 119.6 billion won.
As the domestic stock market is closed for the upcoming presidential election on the 3rd, investors took a breather. The KOSPI market's transaction amount, which had exceeded 10 trillion won for three consecutive transaction days since the 28th of last month, fell below 8 trillion won on this day.
There were clear differences in performance by industry. Amid noises surrounding U.S.-China trade negotiations, the media and entertainment sector, regarded as a tariff-free zone, recorded the highest growth rate at 1% among all sectors. With the leading stocks Samsung Electronics and SK hynix rising, the semiconductor sector also showed strength.
In contrast, the steel sector showed weakness as U.S. President Donald Trump decided to double tariffs on foreign steel and aluminum products from 25% to 50%. Stock prices of financial stocks, which were considered beneficiaries of the policy, also dropped significantly as investors moved to realize profits. KB Financial's stock price fell by over 4%, causing it to lose its position as the fifth largest by market capitalization in the KOSPI market to Hanwha Aerospace. The stocks of Shinhan Financial Group, Hana Financial Group, and Woori Financial Group also declined.
Forecasts suggest that sector differentiation will continue for a while depending on the presidential election results. Securities firms advise that undervalued sectors may be more advantageous than overheating sectors. Moreover, as the new government is likely to intensify tariff negotiations with the U.S. and the political sector initiates discussions on supplementary budget formulation, attention must be paid to volatility.
In the short term, U.S. economic indicators may also affect the market. The U.S. Institute for Supply Management (ISM) May manufacturing Purchasing Managers' Index (PMI), which has high correlation with foreign supply and demand, will be released at 11 p.m. (Korean time) today. The market forecast is 49.3, which is lower than the previous month.
ISM conducts a survey of around 400 corporations' purchasing and supply managers each month before releasing the manufacturing PMI. A manufacturing PMI below the benchmark of 50 indicates contraction, while above indicates expansion. When the U.S. manufacturing sector is in an expansion phase, increased investment correlates with growth in Korean exports; therefore, if the manufacturing PMI exceeds expectations, foreign buying pressure could flow in.
Jerome Powell, Chair of the Federal Reserve, also warrants attention. He will deliver a speech at 2 a.m. (Korean time) on the 3rd as part of the 75th anniversary event of the Fed's International Finance Division. After his meeting with President Trump at the White House on the 29th, Powell reiterated his stance to determine interest rates based on objective indicators and his own judgment, so similar remarks are expected in today's speech. However, there are unconfirmed rumors of a potential resignation from Powell circulating in the market.
Im Jeong-eun, a researcher at KB Securities, noted, "It is necessary to pay attention to whether the influence of the Trump administration's tariff policy is reflected in the economic indicators being released one after another this week, such as U.S. manufacturing and services indicators and the non-farm payroll report," adding, "With speeches scheduled from influential market figures including Powell and Christopher Waller, caution is expected to be emphasized."