Samsung Electronics Gains as KOSPI Falls 0.27% for Second Day

KOSPI Decline Signals Interest-Rate Pressure

The KOSPI closed at 6,870.81 on Sept. 29, down 18.93 points, or 0.27%. The figures reported by Yonhap indicate more than simple market weakness. The index fell for a second straight session despite a gain by Samsung Electronics, showing that rising U.S. government bond yields and oil prices are reshaping valuation benchmarks across the market.

U.S. government bond yields serve as benchmark rates for discounting companies’ future value into present prices. When yields rise, investors find it harder to assign high valuations to profits expected far into the future. Combined with higher oil prices, this also heightens concerns about costs and inflation. What is currently evident is not damage to earnings, but pressure flowing from interest rates into valuations.

How Rising U.S. Government Bond Yields Reached the KOSPI

According to Yonhap, the benchmark U.S. 10-year government bond yield rose to 5.23% overnight, while the 30-year yield climbed to 5.55%. The KOSPI opened 0.19% lower before extending its decline in the afternoon. Interest-rate pressure was reflected in opening prices, and weakening supply-demand (order flow) prolonged the downturn.

Oil prices rose for a second consecutive session amid concerns about supply disruptions in the Middle East, although the data did not provide a closing price or quantify the disruption. The oil-price impact therefore cannot be measured precisely; it should instead be viewed in the context of rising government bond yields and weakening risk appetite occurring together.

Foreign Net Selling of 2.9 Trillion Won Exposes Weak Market Breadth

On Sept. 29, 210.06 million shares changed hands in the South Korean stock market, with trading value totaling 17.99 trillion won, or US$13.26 billion. Foreign investors recorded net sales of 2.9 trillion won, while retail investors and institutional investors purchased a net 1.14 trillion won and 121.06 billion won, respectively. The force dragging down the index was more clearly reflected in the scale of foreign selling than in bargain buying by retail investors.

Declining stocks numbered 622, far exceeding the 231 gainers. Defensive strength in a handful of large-cap stocks was insufficient to offset the market’s broadly weak tone. Lee Kyoung-min of Daishin Securities said rising U.S. government bond yields weighed on investor sentiment, while the renewed increase in international oil prices further weakened risk appetite.

Samsung Electronics Rises as Growth Stocks Diverge

• Samsung Electronics closed at 272,500 won on Sept. 29, up 0.93%. Its gain despite the broader index decline is confirmed, but the data did not identify a specific reason for the rise. Marketwide pressure should not be interpreted as meaning that all large-cap stocks will necessarily decline in tandem.
• SK hynix ended the same session 0.17% lower at 1.76 million won. Its divergence from Samsung Electronics shows that share-price performance varied even among major semiconductor stocks.
• Hyundai Motor fell 1.27% to 350,000 won. Although the stronger won and higher oil prices were observed simultaneously, the available data do not establish a company-specific cause for the stock’s decline.
• LG Energy Solution dropped 3.16% to 352,500 won, the steepest decline among the major stocks listed. The move is consistent with the general tendency for growth-stock valuations to come under pressure when interest rates are high, but no change in the company’s earnings has been confirmed.

Stronger Won Contrasts With Domestic Bond Rally

At 3:30 p.m. on Sept. 29, the won stood at 1,356.7 per dollar, strengthening by 3.2 won from the previous session’s closing level. The combination of foreign net selling and a stronger won shows that stock-market supply-demand (order flow) cannot be explained by the exchange rate alone. To assess foreign investor activity, investors should consider government bond yields and actual net trading alongside the exchange rate.

Domestic bond prices rose. At the Sept. 29 close, the three-year government bond yield fell 4.3 basis points to 4.076, while the benchmark five-year government bond yield dropped 6.9 basis points to 4.276. The divergence between rising U.S. long-term rates and falling domestic bond yields is another reason this session cannot be reduced to a single interest-rate narrative.

Conditions Separating a Bullish Reversal From Further Weakness

A bullish scenario could emerge if the increases in U.S. government bond yields and oil prices lose momentum, easing concerns about both discount rates and inflation. A reduction in foreign net selling would also ease supply-demand (order flow) pressure on the KOSPI.

A bearish scenario would gain traction if both trends persist. Elevated U.S. government bond yields would continue to weigh on valuations, while rising oil prices would encourage risk aversion. In that case, the market could remain in a prolonged phase of repricing stocks lower even without company-specific earnings data.

Investment Indicators to Watch in the Next Session

• Monitor whether the benchmark U.S. 10-year and 30-year government bond yields continue rising from 5.23% and 5.55%, respectively.
• Distinguish between whether oil prices, up for a second straight session, continue to rise and whether new information emerges on the scale of supply disruptions.
• Track whether foreign net selling declines from 2.9 trillion won and whether the KOSPI’s ratio of advancing to declining stocks improves.
• Rather than focusing solely on whether the won strengthens further from 1,356.7 per dollar, watch whether the exchange rate and foreign investor net trading resume moving in the same direction.

The market has already priced in concerns about rising interest rates and oil prices. What remains unconfirmed is whether those pressures have reached corporate earnings. Rather than drawing premature conclusions about next quarter’s earnings, investors should first watch whether U.S. government bond yields, oil prices, and foreign investor net trading continue moving in the same direction as the key macro triggers.

This article was automatically summarized and analyzed based on the original news report. View original article (Financial Times)