South Korean stocks expected to trade sideways amid Iran-US peace talks, profit-taking

SEOUL (Yonhap) -- South Korean stocks are expected to trade sideways on May 22, with investors closely watching whether the market can sustain its upward momentum amid hopes for a peace agreement between the United States and Iran.

On May 21, the KOSPI closed at 7,815.59, up 606.64 points, or 8.42%, marking the largest-ever single-day gain in its history. This surge was fueled by a confluence of positive factors, including the resolution of uncertainty surrounding a potential strike by the Samsung Electronics union and strong earnings from U.S. chipmaker Nvidia.

The index saw its trading temporarily halted with a "buy sidecar" just 24 minutes after the market opened due to the rapid price increase.

On the KOSPI market, institutional investors were net buyers with a surplus of 2.908 trillion won. Foreign investors continued their selling streak for the 11th consecutive trading day, but their net selling amount was limited to 219.6 billion won, a significant reduction compared to the average daily net selling of over 4 trillion won recorded from May 7 to May 20.

Individual investors turned to net sellers with a surplus of 2.6754 trillion won, shifting from net buying to net selling for the first time in 11 trading days.

Samsung Electronics (8.51%), the bellwether of the domestic stock market, closed at 299,500 won, reaching a new all-time high in terms of closing price and inching closer to the '300,000 won' mark. SK Hynix (11.17%) finished at 1.94 million won.

The combined market capitalization of these two stocks accounted for 48.99% of the KOSPI's total market cap, the highest ever recorded.

Meanwhile, the KOSDAQ index closed at 1,105.97, up 49.90 points, or 4.73%. A buy sidecar was also activated in the early trading session on the KOSDAQ market.

Overnight, U.S. stock markets saw modest gains across the three major indices, buoyed by expectations of negotiations between the U.S. and Iran.

The Dow Jones Industrial Average rose 0.55% to a record high of 50,285.66, while the S&P 500 and Nasdaq Composite indices closed up 0.17% and 0.09%, respectively.

Nvidia, which announced earnings that surpassed market expectations the previous day, saw its stock price fall 1.77% due to profit-taking. However, the Philadelphia Semiconductor Index rose 1.28%.

A Reuters report stating that Iran's Supreme Leader Ayatollah Mojtaba Khamenei had ordered a ban on the export of enriched uranium abroad temporarily put pressure on the stock market, causing U.S. Treasury yields and international oil prices to surge.

Notably, U.S. President Donald Trump's statement that the U.S. would secure and destroy Iran's highly enriched uranium indicated that the two countries were on diverging paths.

However, the mood shifted in the latter half of the trading session as signals emerged that negotiations between the U.S. and Iran were continuing. The market recalled President Trump's statement the previous day that negotiations with Iran were in their 'final stages,' focusing on the possibility of a diplomatic resolution.

U.S. Secretary of State Marco Rubio offered reassurance to the market, stating, "There are some positive signs" regarding the Iran negotiations. Rubio added that he heard that Pakistan, a mediating country, was scheduled to visit Iran, saying, "I hope it serves as an opportunity to further advance the situation."

Consequently, international oil prices also declined. July Brent crude futures fell 2.32% from the previous session, and U.S. West Texas Intermediate (WTI) crude futures closed down 1.94%.

"Ultimately, the market is moving again, using oil prices as a barometer, depending on the direction of the peace talks between Iran and the U.S.," analyzed Kim Seok-hwan, an analyst at Mirae Asset Securities.

The MSCI Korea Index ETF, a gauge of investor sentiment toward the South Korean stock market, rose 3.51% during regular trading hours, and the KOSPI 200 futures index rose 0.36% overnight.

The dollar-to-won exchange rate closed at 1,508.00 won, up 1.20 won from the previous day's closing price in the Seoul foreign exchange market, maintaining the 1,500 won level.

As a result, while the KOSPI is attempting to re-enter the 8,000-point level, which it recorded for the first time on May 15, its upward momentum is expected to be limited due to profit-taking following yesterday's sharp rise.

"The domestic stock market is expected to show a neutral stock price movement after digesting profit-taking orders in the early trading session due to the impact of the KOSPI's 8% surge yesterday, and then be influenced by news related to U.S.-Iran negotiations and cautious sentiment ahead of the holiday closure next Monday," predicted Han Ji-young, an analyst at Kiwoom Securities.