The U.S. Federal Reserve has indicated the possibility of an additional interest rate hike this year, raising concerns for the Korean stock market. As the KOSPI remains trapped in a trading range, fears are growing that declining trading volumes may become a permanent trend.
On September 17, the KOSPI closed at 6,715.41, down 2.56 points (0.04%) from the previous trading day. The index opened at 6,779.02, up 61.05 points (0.91%), but fluctuated around the 6,770 mark before giving up its gains and turning negative as the market approached closing.
Foreign selling was particularly pronounced, with foreign investors net selling 22.8 billion won worth of stocks in the KOSPI market, marking the seventh consecutive day of selling. The widening interest rate gap between South Korea and the U.S., now at 1.0 percentage point, is believed to have contributed to this trend.
Analysts suggest that the Federal Open Market Committee's (FOMC) more hawkish-than-expected results could further shrink trading activity in the domestic market. According to the Korea Financial Investment Association, as of September 15, investor deposits totaled 105.3 trillion won, a decrease of 15.3 trillion won compared to three months ago. This decline is attributed to a 22.43% drop in the KOSPI, which fell from 8,543 to 6,627 during the same period, indicating a contraction in investor sentiment.
Concerns are also rising over a potential sharp decline in trading volumes. From September 1 to 15, the average daily trading volume in the KOSPI market was 21.4 trillion won, the lowest monthly figure recorded this year. This represents a more than 50% decrease compared to the peak in June. Analysts warn that if funding costs for foreign and institutional investors continue to rise, trading volumes could further diminish.
The prospect of a rate hike by the Fed has also darkened profit forecasts for the securities industry. The sector reported a record net profit of 8.9 trillion won in the first half of the year, buoyed by a stock market boom. However, rising oil prices and interest rates are expected to weigh down profits in the second half.
In fact, there is a trend of downward adjustments in earnings forecasts for securities firms. Mirae Asset Securities, which recorded a net profit of 1.9 trillion won in the second quarter, has seen its third-quarter consensus drop from 251.1 billion won a month ago to 196.9 billion won, a 21.6% reduction. Kiwoom Securities' third-quarter consensus fell from 431.9 billion won to 405.9 billion won, a 6.0% decrease, while NH Investment & Securities saw its forecast drop from 430.3 billion won to 409.4 billion won, a 4.9% decline.
A representative from the securities industry stated, "Overall, the domestic market is experiencing a situation where trading volumes are declining. For securities firms, which rely heavily on commission income, the outlook for operating profits is becoming increasingly uncertain."
* This article has been translated by AI.
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