Stock Index Collapsed below 700 Points due to Anxiety for Middle East and Financial Scandal

Stock value is not increased only by the expectation. That is true especially when unfavorable factors pile up under an obscure circumstance. There was an expectation that the Korean Stock market will benefit from the rally in the US Wall Street last week. But the expectation was not met because of the possibility of Iraq War and a super financial scandal of Ssangyoung. Korean Composite Stock Index (KCSI) dropped below 700 points for last one month.

On 9th, KCSI closed at 697.89 points dropped by 10.84 points (1.53%) compared to the end of the last week, and 700 points collapsed first since 12th of August of 695.39 points. Kosdaq Index also closed at 53.66 points dropped by 2.56 points (4.55%). It the lowest level since 8th of October of the last year of 53.55 points for 11 months.

The number of items dropped in value was 672 items in stock exchange market and 706 items in Kosdaq and only 140 items and 86 items recorded increased in value each. As foreign investors were on purchasing position, so Samsung Electronics (0.47%) and SK Telecom (1.11%) increased, however Ssangyoung group’ stocks and banks’ stocks decreased.

KCSI began on the increasing tendency because of the increase of US stocks and foreigners’ net purchasing (59.3 billion won) and recorded 716.72 points once. However as foreigners began to sell KOSPI future by 3228 (142.9 billion won), the stock value began to decline. Stock companies purchased 80.1 billion won to maintain 700 points, but the amount couldn’t support the personal net sale of 137.2 billion won.

The moving average of KCSI and Kosdaq Index (718.25, 57.01) at 5th was below of moving average of 20th (725.34, 58.35), so short-term deadcross happened. Additionally, the index, and moving averages of 5 days, 20 days, 60 days and 120 days positioned from the bottom, reverse placement. So the stock value is expected to be decline tendency temporarily.

With the 12th, the overlap day of redemption of KOSPI 200 futures, options and individual stock September option before on, there is no major player to purchase, and it causes the decline tendency of stock value.

Chan-Sun Hong hcs@donga.com