Kospi retreats below 7,000 as oil prices, interest rates surge

The Kospi surrendered the 7,000 level on Friday for the first time in three trading sessions, as surging crude oil prices and interest rates rattled investor sentiment. Foreign and institutional investors combined for more than 3.5 trillion won ($2.62 billion) in net selling, dragging the index lower.

According to Korea Exchange, the Kospi closed at 6,909.91, down 124.01 points, or 1.76 percent, from the previous session.

The index opened sharply lower, falling 231.42 points, or 3.29 percent, to 6,802.50, before trimming losses as retail investors and other corporations stepped in with buying. The index was unable to reclaim the 7,000 mark by the close.

On the main Kospi market, individual investors net-bought 1.87 trillion won, while other corporations posted net purchases of 1.65 trillion won. Foreign investors and institutions net-sold 2.3 trillion won and 1.22 trillion won, respectively.

Foreign investors also net-sold 680 billion won in the KOSPI 200 futures market.

Investor sentiment froze as international oil prices and market interest rates surged simultaneously. Brent crude futures topped $105.74 per barrel, while West Texas Intermediate rose to $100.92, with both benchmarks crossing the $100 mark.

The yield on the 10-year US Treasury note exceeded 4.9 percent. The yield on three-year South Korean government bonds also broke through 4.0 percent during trading, reaching its highest level in roughly three years.

"With the US August consumer price index set to be released tonight — a key variable that will determine the direction of financial markets going forward — caution is running high amid the sharp rise in international oil prices and producer prices," said Lee Kyung-min, an analyst at Daishin Securities.

Most large-cap stocks also weakened. Samsung Electronics fell 3.53 percent to close at 259,500 won, while SK hynix dropped 2.21 percent to 1.81 million won.

SK Square (-4.05 percent), LG Energy Solution (-1.37 percent) and Hyundai Motor (-1.67 percent) also declined.

KB Financial Group rose 2.60 percent. Doosan Enerbility gained 1.00 percent and Hanwha Aerospace advanced 1.31 percent.

The Kosdaq also fell nearly 2 percent, closing at 820.64, down 16.28 points, or 1.95 percent, from the previous session.

The index opened down 20.01 points, or 2.39 percent, at 816.91 and extended its losses through the session.

On the Kosdaq market, individual investors net-bought 511.7 billion won, while foreign investors and institutions net-sold 313.6 billion won and 215.9 billion won, respectively.

Among top Kosdaq-listed stocks by market capitalization, Alteogen fell 3.25 percent, Ecopro dropped 2.88 percent and Ecopro BM declined 7.08 percent. PSK Holdings rose 1.29 percent and Ollix gained 9.52 percent.