Stock prices in Seoul surge more than 1% due to expectations of interest rate reduction
In a positive turn of events for the South Korean stock market, the benchmark Korea Composite Stock Price Index surged by 1.08 percent on Wednesday, August 7, 2019. This rise can be attributed mainly to positive trade developments and improvements in export data, as South Korea's exports rose for the second consecutive month in July 2019.
The strong export performance, reflecting robust demand in the semiconductor sector and pre-tariff shipment acceleration, was a key factor driving the market's movement. Additionally, the U.S. and South Korea reached a tariff agreement, setting U.S. tariffs on Korean imports at 15 percent, and announcements of tariffs being moderated and new trade deals helped lift market confidence.
The deal with the U.S. partially eased the threat of higher tariffs, a significant concern for South Korea’s export-driven economy. This agreement, announced just before tariff deadlines, contributed to market relief. Furthermore, the trade talks between the U.S. and its allies such as South Korea signaled a possible broader de-escalation, which can improve market sentiment despite ongoing uncertainties.
Notable gainers on this day included Korean Air, which rose by 5.45 percent to 25,150 won, HD Korea Shipbuilding & Offshore Engineering, which vaulted 6.6 percent to 379,500 won, and LG Display, which surged 22.49 percent to 13,290 won following a US import ban on organic light-emitting diode panels produced by China's BOE Technology Group Co.
However, some decliners outnumbered gainers, with Nongshim falling 1.05 percent to 376,000 won, and Kakao declining 0.31 percent to 63,500 won. Institutions sold a net 80.8 billion won worth of stocks on Wednesday, while foreigners bought a net 634 billion won worth of stocks.
In other news, the US consumer prices index rose in line with expectations in July, fueling hopes for a US rate cut next month. Samsung Electronics rose 1.13 percent to 71,900 won, and Hyundai Motor advanced 1.41 percent to 216,000 won.
The local currency was quoted at 1,381.7 won against the greenback at 3:30 p.m. (Yonhap). Trade volume on Wednesday was moderate at 316.4 million shares worth 10.2 trillion won.
Despite some uncertainties over the government’s tax revision plans, the overall sentiment in the South Korean stock market remains positive, driven by the positive trade developments and strong export data.
The strong export data, particularly in the semiconductor sector, and favorable trade developments with the US have significantly contributed to the growth in South Korea's business sector, including the increase in the stock market as evidenced by Korean Air, HD Korea Shipbuilding, and LG Display. Meanwhile, the move towards moderated tariffs and new trade deals between the US and its allies, such as South Korea, have further boosted market confidence in the finance and investing industry.
