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Hana Bank headquarters' dealing room in Myeong-dong, Seoul on Feb. 14 Asian stock markets lost ground on Monday with South Korea’s main shares down to the lowest in more than two weeks as rising tensions over Ukraine boosted expectations of inflation that could speed up rate hikes by central banks, especially the US Federal Reserve.Investor sentiment soured further on disappointing corporate earnings and increasing short selling.South Korea’s Kospi ended down 1.57% to 2,704.48 after falling to as low as 2,688.24, the lowest since Jan. 28, amid most large caps such as Samsung Electronics Co. and LG Energy Solution Ltd. down. NCSoft Corp., Samsung SDI Co. and Hyundai Motor Co. declined to 52-week lows.The junior Kosdaq lost 2.81% as 114 names including HLB Co., KMW Inc., hit all-time troughs. Mirae Asset Global Investments Co.’s TIGER KEDI Innovator ESG30 exchange-traded fund (ETF), tracking The Korea Economic Daily’s in-house index, skidded 1.7%.Stocks in other Asian countries followed the weakness. Japan’s Nikkei index fell 2.23% and China’s benchmark Shanghai Composite Index declined 1.09%. Taiwan and Hong Kong shares slid 1.71% and 1.39%, respectively.TIGHTENING AMID WAR RISKS?Investors shun risky assets on growing concerns over a potential full-scale invasion by Russia into Ukraine that could accelerate inflation further. Russia produces 16% of global natural gas and 12% of crude oil.US President Joe Biden told Russia’s Vladimir Putin that the West would respond decisively to any invasion of Ukraine, but the warning failed to ease the tensions. Service members take part in military exercises held by the armed forces of Russia and Belarus at the Gozhsky training ground in the Grodno region, Belarus. (Courtesy of Reuters, Yonhap) Russia may suspend supply of the energy resources, significantly increasing inflationary pressure, if the US and its allies impose economic sanctions to avoid military conflicts, analysts said. The Fed is expected to raise interest rates more quickly than earlier forecast, they added.“Stock markets are haunted by worries that the Fed’s aggressive tightening could hurt an economic recovery,” said SK Securities’ research center head Choi Seok-won.Disappointing South Korean corporate earnings further weighed on investor sentiment with 70% of firms logging results for the fourth quarter below forecast, according to financial information provider FnGuide Inc. That was worse than 63% last year and 62.8% in 2019.Some analysts advised raising cash holdings to deal with further losses.“It is better to maximize cash holdings and focus on defensive stocks such as financial and telecom names,” Lee Kyung-min, an analyst at Daishin Securities Co. said.BUY ON DIPSSome experts, however, said the recent declines in stock markets provided chances to buy stocks at bargain for long-term investment.Stocks of companies with healthy earnings are expected to rebound once the geopolitical tensions are resolved and inflation slows, they added.“It took about a week for markets to rebound even in a war,” said Growth Hill Asset Management CEO Kim Tae-hong said. “Around the 2,700 level that is about 20% down from the (Kospi’s) peak, it is better to buy stocks backed by strong earnings on dips.”Meritz Securities analyst Hwang Soo-wook said the impact on financial markets of any military conflict between Russia and Ukraine may not be so severe.“In the past, when an expected war broke out, stock markets rose,” Hwang said. “Since stock prices have been reflecting the war risks, they are likely to rebound once it happens.”By Sung-Mi Shim and Hyeong-Gyo Seosmshim@hankyung.comJongwoo Cheon edited this article.
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