South Korean Stocks Lose 2019 Gains as Trade War Continues

(Bloomberg) -- South Korea’s $1.3 trillion stock market became the latest victim of the U.S.-China trade war, with its benchmark index losing all of this year’s advance on Wednesday.

The Kospi index fell 1.3% to 2,023.32 at the close in Seoul, its lowest since Jan. 4. Foreign investors sold a net 360 billion won ($301 million) of Kospi shares as of 3:52 p.m. Seoul time. The Korean market became the second in Asia to forfeit gains made in 2019, after losing gains in intraday trading several times in the past week. Indonesia’s Jakarta Composite Index, down 1.5% for the year, gave up its year-to-date climb on May 14.

The selloff in Korean stocks came as earnings for Kospi members fell an average 36% in the first quarter amid weak economic growth. Trade tensions between the U.S. and China have soured investor sentiment for Korean stocks, especially in technology, as well as cyclical and consumer stocks tied to China. Roughly two-thirds of Korea’s semiconductor exports go to China.

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Overseas investors have offloaded about 2.3 trillion won of Kospi shares in May, as the Korean won fell to a two-year low to be Asia’s worst currency. Samsung Electronics Co., the biggest stock on the gauge by weighting, was down 1.8% Wednesday on concerns that the world’s largest memory-chip maker would be hit by shrinking demand due to the deepening trade disputes between the U.S. and China. Semiconductor accounts for about a fifth of South Korea’s exports.

“It would be hard to expect a radical rebound for the Kospi index unless the U.S. and China reach an agreement over the trade conflict,” said JPMorgan analyst J.J. Park.

The Kospi is trading at about 10.6 times of its 12-month forward earnings, the highest level since June 2016. The market’s estimates on the earnings of Korean companies are being lowered, especially for the technology sector, Park said.

--With assistance from Matt Turner.

To contact the reporter on this story: Heejin Kim in Seoul at hkim579@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Teo Chian Wei, Naoto Hosoda

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