Kospi tumbles on renewed US protectionism threats

South Korea‘s top-tier stock market Kospi retreated 1 percent on Friday, while the local currency strengthened, in part on fears over heightening tariff threats by US President Donald Trump triggering a possible trade war.

On Friday, the Kospi came close to breaching 2,400 mark by closed at 2,402.16, down 1 percent compared to the previous trading day. The market maintained a losing streak for three consecutive trading days since Tuesday. Korean stock markets closed on Thursday for a national holiday. The second-tier Kosdaq inched up 0.4 percent

Foreign and institutional sell-offs prompted the bearish trend. Institutional investors net sold shares worth 307.2 billion won ($284.2 million) Friday. Foreign investors also net sold stocks worth 232.9 billion won, adding to the weakness.

Kospi giants were mixed. Smartphone maker Samsung Electronics slid 2.2 percent from Wednesday, while carmaker Hyundai Motor fell 3.4 percent. Steelmakers Posco and Hyundai Steel took a 3.6 percent and 3 percent loss, respectively. Meanwhile, chipmaker SK hynix rose 0.8 percent, while biosimilar maker Celltrion surged 5.4 percent. Fourteen out of the 20 largest Kospi-listed stocks in market cap dropped.

By sectors in both Kospi and Kosdaq, the steel sector sank 3.1 percent, while non-ferrous sector slid 1.3 percent. The auto sector fell 2.9 percent, the semiconductor sector dipped 1.9 percent and the information technology sector edged down 0.5 percent.

Local currency strengthened by 2.5 won against the dollar compared to a day prior, as the greenback was trading at 1,080.3 won at the session‘s close.

On Thursday, US stock markets stumbled. The broad-based S&P 500 was down 1.3 percent from Wednesday. The Dow Jones industrial average sank 1.7 percent, while the Nasdaq Composite fell 1.3 percent.

This came after Trump vowed Thursday to slap tariffs of 25 percent on imported steel and 10 percent on aluminum next week, in a bid to protect US producers.

Seo Sang-young, an analyst at Kiwoom Securities, wrote that Trump’s pressure on trade counterparts will batter stocks subject to trade war issue, while downplaying the possibilities that a rate hike issue will pose little impact on the markets, in a note Friday.

“The trade protectionism issue poses a pressure on Korea that has high reliance on exports,” he wrote. “Stocks related to bilateral free trade agreement or trade war between China and the US will cause the drop in stock indexes,”

But the degree of drop would be limited, according to Seo, as Korea is not new to the trade war threat.

Another analyst, Shim Hye-jin of Samsung Securities, wrote in a Friday note the tariff pressure will hit Korea “both directly and indirectly.”

“The trade pressure will not only impact directly on Korea‘s exports to the US, but also result in a drop in intermediate goods exports to China,” she wrote. “We should also consider additional measures for trade protectionism could be slapped, if China’s exports to the US lead to an increase in Korea‘s export to the US.”

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