Korean stock market on bull run on signs of trade war thaw

South Korea’s stock market benchmark indexes were moderately higher Thursday on signs of abating trade strife between the United States and China.

The top-tier benchmark Kospi inched up 0.6 percent higher than the previous trading day’s close, while the second-tier Kosdaq ticked up 0.8 percent.

On the main bourse, foreign investors net purchased shares worth 484.4 billion won ($431.3 million). Domestic institutional investors net sold stocks worth 311.7 billion won, ending a net buying trend of three consecutive trading days through Wednesday.

On the Kospi gainers outnumbered losers 652 to 182, but market giants took losses. Samsung Electronics and SK hynix both fell 1.1 percent, while Celltrion sank 4 percent.

The Korean market extended a two-day rally from the previous day, when the Kospi rose 1.4 percent and Kosdaq soared 2.3 percent.

This came after a bullish Wall Street on signs of trade talk progress. The broad-based S&P 500 climbed 0.5 percent, tech-heavy Nasdaq Composite rose 1 percent and Dow Jones Industrial Average went up 0.6 percent.

China is reportedly moving to scrap its industrial blueprint, “Made in China 2025.” The plan has aimed to turn China into a technology manufacturing powerhouse by 2025, drawing backlash by US President Donald Trump as a protectionist scheme.

The news of China’s reported change in stance has increased risk appetite of investors, an apparent boon to Korean stock markets, said Seo Sang-young, an analyst at Kiwoom Securities.

“The possible correction of ‘Made in China 2025’ is raising expectations for US-China trade war relief,” Seo wrote, adding the news will also improve investor sentiment toward the electrical and electronic sector here.

Alongside the news, China reportedly purchased at least 500,000 tons of US soybeans on Wednesday, marking a first major purchase.

In light of the change, Korean funds investing in Chinese assets saw a net influx of investment worth 20 billion won in the recent month through Wednesday, according to data from market tracker FnGuide. The figure showed a sharp contrast with a combined 16.6 billion won net fund outflow of domestic funds investing in overseas assets.

Funds investing in Chinese assets narrowed the loss. The loss in the recent month came to 1 percent, from 20.9 percent in 11 months since January.

But analysts maintained wary eyes on the prolonged domestic market volatility. Despite a three-month cease-fire on the tariff row announced by Trump and Chinese President Xi Jinping earlier this month, the market was rattled by news that dented trade talks progress, such as the arrest of Meng Wanzhou, chief financial officer of China’s Huawei Technologies. She was released on bail in Canada on Tuesday.

The Korean market will be subject to volatility due to external uncertainties for the time being, wrote Park Sang-hyun, chief economist at Leading Investment & Securities.

“Weak economic fundamentals has triggered market correction in Korea to the larger extent compared to foreign markets,” Park wrote, adding strong fundamental is key to minimizing market impact from uncertainties.

By Son Ji-hyoung 
(consnow@heraldcorp.com)