Kospi soars nearly 2 percent with U.S. trade talks extended to August

A screen in Hana Bank’s trading room in central Seoul shows the Kospi closing at 3,114.95 points on July 8, up 55.48 points, or 1.81 percent, from the previous trading session. [NEWS1]

Korea’s main Kospi bourse rallied to bounce back above the 3,100 threshold on Tuesday as investors, relieved by U.S. President Donald Trump’s extension of tariff talks with trade partners to the start of August, continued a buying streak for two consecutive days.

The Kospi gained 55.48 points, or 1.81 percent, to close at 3,114.95.

Trade volume was heavy at 735.5 million shares worth 13.2 trillion won ($9.65 billion), with gainers outnumbering decliners 643 to 240.

Foreign investors led the bullish mode, scooping a net 251.6 billion won worth of stocks, and institutions bought a net 21.6 billion won. However, individuals dumped a net 263.1 billion won.

Earlier in the day, Trump unveiled a letter addressed to President Lee Jae Myung saying that the United States would start imposing 25 percent tariffs on Korean products on Aug. 1. Washington imposed country-specific reciprocal tariffs in April but placed them on a 90-day pause, which was set to end Tuesday.

Analysts said that the letter is negative for Korea but brushed off uncertainty regarding U.S. tariff policies. Similar letters were also sent to the United States’ other key trade partners including Japan.

Whether or not the Kospi will be able to continue its upward momentum, bolstered by the Lee administration’s promised market reform policies and industry incentives, however, is unclear, according to analysts. The market will instead focus on firms’ second quarter earnings reports until the Aug. 1 deadline, they added.

“The market is placing more weight on securing additional upward momentum driven by expectations of policy benefits,” KB Securities said in its report Tuesday.

“As the full-scale earnings season approaches, a selective approach, focusing on stocks within leading sectors that are expected to show earnings growth, is needed.”

The Korean government said it will “intensify negotiations” in response to Trump’s 25 percent rate on Korean goods in an effort to minimize fluctuation.

The Ministry of Trade, Industry and Energy issued the statement immediately after Trump posted the letter, promising to address U.S. concerns regarding trade deficits through domestic policy reform, regulatory rationalization and a review of the two countries’ manufacturing partnership ahead of the tariff deadline.

Responding to the government’s efforts, financial and energy shares were among the biggest winners on Tuesday.

Hana Financial Group surged 10.27 percent to 94,500 won, and Woori Financial Group soared 8.32 percent to 25,400 won. Samsung Fire & Marine Insurance jumped 5.11 percent to 463,000 won, and Kyobo Securities vaulted 9.1 percent to 9,110 won. Korea Electric Power Corporation rose 4.46 percent to 38,650 won, and Doosan Enerbility advanced 5.88 percent to 66,600 won.

Carmakers also finished in positive territory. Trump’s letter notably specified that the 25 percent rate would be “separate from all sectoral tariffs,” such as the previously announced rates for automobiles and steel.

Industry leader Hyundai Motor gained 1.2 percent to 211,000 won, and its sister Kia rose 0.51 percent to 99,100 won.

However, Samsung Electronics fell 0.49 percent to 61,400 won following its worse-than-expected second quarter earnings guidance released earlier on in the day. The world’s largest memory chipmaker estimated that its second quarter operating profit had plunged 55.9 percent from a year earlier due to sluggish chip business and the fallout from U.S. trade policies, missing analysts’ expectations.

The local currency fell slightly against the dollar. It was quoted at 1,367.9 won against the greenback at 3:30 p.m., up 0.1 percent from the previous session’s quote of 1,367.8 won.

Bond prices, which move inversely to yields, closed higher. The yield on three-year Treasurys fell 0.5 basis point to 2.477 percent, and the return on the benchmark five-year government bonds dropped 0.2 basis point to 2.635 percent.