It was a day of mixed fortunes by sector in the domestic stock market. While the shipbuilding, machinery, and power equipment sectors fell due to tariff pressures and budget cuts from the Donald Trump administration, the entertainment and content sectors were strong on hopes for the easing of China's ban on Korean wave.
Large-cap stocks struggled, leading to declines in both the KOSPI index and KOSDAQ index on the 20th. Compared to the previous day, the KOSPI index fell 17.46 points (0.65%) to close at 2,654.06, while the KOSDAQ index recorded a decline of 10 points (1.28%) to finish at 768.27. The KOSPI index showed weakness for the first time in eight trading days, while the KOSDAQ index was weak for six trading days.
According to the Korea Exchange (KRX), among the KRX sector indices, machinery equipment recorded the largest decline (-3.31%). Poor performance from shipbuilding stocks was particularly noticeable. HD Hyundai Heavy Industries saw its stock price drop more than 11% in just one day. The other companies considered to be 'Big 3 in shipbuilding,' Samsung Heavy Industries and Hanwha Ocean, were also weak.
Stocks of power equipment and wire corporations, including LS, HD Hyundai Electric, Hyosung Heavy Industries, Taihan Cable & Solution, ILJIN Electric, and Cheryong Electric, also saw a downward trend.
As President Trump announced tariffs on automobiles, semiconductors, pharmaceuticals, and lumber, 'tariff concerns' have resurfaced. The news that the defense budget might be cut also acted as a negative factor.
On the contrary, the steel and essential consumer goods, media & entertainment sectors rose. Stocks of steel companies like Hyundai Steel and POSCO Holdings were stimulated by expectations that the government would soon investigate the low-cost supply of hot-rolled steel plates from China and Japan. This is because if low-priced products are less circulated, the profitability of steel companies could improve.
YG Entertainment, SME, JYP Entertainment, and content companies like Studio Dragon and DearU all set new yearly highs. This was due to projections that the Chinese government would lift the ban on Korean wave by the first half of this year.
On expectations for the Chinese market, stocks of cosmetics companies, including LG H&H, Amorepacific Corporation, TONYMOLY, Hankook Cosmetics Manufacturing, and MA:NYO, also traded at higher prices compared to the previous day.
In both the KOSPI and KOSDAQ markets, only individuals acted as net buyers. In the KOSPI market, individuals made a net purchase of 2,978 won. Meanwhile, foreigners and institutions made net sales of 271.4 billion won and 121.7 billion won, respectively. In the KOSDAQ market, individuals showed a net buying advantage of 3,522 won, while foreigners and institutions had net selling advantages of 221 billion won and 123.1 billion won, respectively.
Among the top 10 stocks by market capitalization in the KOSPI market, only LG Energy Solution and KB Financial saw their stock prices rise compared to the previous day. Stocks of Samsung Electronics, SK hynix, Samsung Biologics, and Hyundai Motor all experienced declines.
In the KOSDAQ market, only Ecopro BM and HUGEL showed strength among the top 10 stocks by market capitalization, while Alteogen and HLB ended trading at lower prices than the previous day.
Recently, there have been evaluations that the domestic stock market experienced profit-taking sales amid a bullish trend. Lee Kyung-min, a researcher at DAISHIN SECURITIES, noted, "After a rapid rise, it seems to have entered a phase of short-term profit-taking and stock adjustments," and added, "There were also clear profit-taking movements in European STOXX 600 and Hong Kong Hang Seng indices, as well as in the KOSPI index, excluding the U.S. market."
One reason the Korean stock market has been able to rise sharply recently is its undervaluation, but there are also aspects that make it hard to view it as a bargain anymore. Based on the previous day's closing price, the KOSPI index had a 12-month forward price-to-earnings ratio (PER) of 9.5 times. Last August, it recovered to a level just before the so-called 'Black Friday and Monday,' when the KOSPI index was around 2,800. However, as the profit outlook for listed companies in the KOSPI market fell over the same period, the forward PER reached the same low point.
There are a series of events that could heighten market volatility. On the 26th, NVIDIA's fiscal year 2025 fourth-quarter earnings announcement (November 2024 to January 2025) is scheduled. The average earnings per share (EPS) forecast for the market is $0.845, with expectations of a new all-time high. It is also expected to affect the trends of domestic semiconductor stocks.
Starting with tariff issues between the U.S., Canada, and Mexico in early March, there are also the federal government's debt ceiling negotiations in mid-March and the Federal Open Market Committee (FOMC) regular meeting to consider. Talks over a potential ceasefire between Russia and Ukraine could also gain momentum.
Advice has been given to base strategies on the atmosphere of the U.S. stock market. Lee Woong-chan, a researcher at iM Securities, said, "As long as the U.S. stock market maintains a decent situation, the global stock market rally will continue," and added, "Although the expectations for artificial intelligence (AI) are still alive, many things need to be confirmed as the outlook for corporate earnings has been revised downward this year."