The attack of the US led to the plunge of Korean stock market.

Short Comment

July 26, US President Donald Trump attacked China and South Korea in WTO. The futures of HangSeng and KOSPI200 in the night was looking like fine with the attack, but the indices plunged on next trading day. HangSeng and KOPSI200 fell by 1.03% and 1.65% respectively for July 29. NIKKEI225 and Taiwan Weighted fell just by 0.19% and 0.06% respectively. Mr. Trump did not mention Japan and Taiwan on the meeting.

It proved that the concern for trade-war is still proceeding in the global markets, and the Korean market is very sensitive to the concern. Trade-war between the US and China looks like sleeping, but it could come up and raid the market anytime.

For this time, there are a few grounds why we could accept the plunge as temporary movement. Even though KRW is in bearish momentum recently, the rate of USDKRW went down by 0.11% today. Usually, the degree of the down in regional stock market brings the rise more than 0.8% to the rate. Besides, futures of 10year Korean Government bond went up just by 8 ticks. It could have gone more than 50 ticks with the plunge more than 1% of the stock market. Lastly, the outflow of foreign investors who have the biggest influence on the regional market was limited. They sold just KRW 62 billion for the day.

However, we need to worry about the market. It could be the first victim of coming economic recession. The mention by Mr. Trump could be just one-time issue, but his mention was proving the weakening fundamental of the Korea stock market. Sluggish global manufacturing indices and trade issue with Japan are wringing Korean conglomerates, and the market is reflecting it perfectly.

I still believe KOSPI200 would touch 280, following the US market. The stock market does not reflect fundamental value all the time. However, it could take more time than two weeks. Difficulty the market is going through is becoming stronger.