[Good Morning Stock Market] Kospi Ahead of Chuseok, Limited Rise... Direction of Foreign Investors

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Investment sentiment is expected to weaken ahead of the Chuseok holiday next week. Even if the KOSPI index rises, the extent of the increase is likely to be limited, according to prevailing forecasts.

On the 16th, Seo Sang-young, a researcher at Mirae Asset Securities, stated, "The U.S. stock market showed mixed movements around the flat zone but expanded gains in the afternoon, demonstrating strength, which is expected to have a positive impact on the Korean stock market. However, considering that the rise is due to individual factors, the expansion of gains is likely to be limited." He added, "Moreover, with the U.S. futures and options expiration tomorrow and the upcoming Chuseok holiday next week, if active foreign investor movements do not continue, the possibility of profit-taking sales cannot be ruled out."

Although the KOSPI is attempting a rebound at the 200-day moving average after falling below the 120-day moving average, it appears that the Ichimoku cloud is acting as resistance, making it difficult to break through the resistance level, according to some advice.

After the September futures expiration on the 9th, the KOSPI rose for four consecutive days until the day before, but the overall stock price trend seems to be moving into a correction phase. During the mid-August correction process, the support levels of the July lows and the 120-day moving average were breached downward, and during the rebound process continuing until early September, the July lows and the lower boundary of the cloud were confirmed as resistance before the index declined again.

Jung In-ji, a researcher at Yuanta Securities, analyzed, "Looking at the trend since early July, the market is progressing in a stair-step downward structure, so even if a short-term rebound phase continues, the extent of the rise is likely to be limited. The intraday lows on August 20 and September 10 were formed around the 200-day moving average level, and the September lows are higher than those in August, indicating that the low-price buying demand is not weak yet. However, as long as the Ichimoku cloud acts as resistance, the medium to long-term outlook favors a possibility of decline."

He continued, "So far, the 200-day moving average has acted as support, but if it is breached, the correction range is likely to expand. The won-dollar exchange rate has formed a box range since the beginning of the year and is currently forming a stair-step upward structure by breaking through the upper boundary of the box range. If this trend continues, the KOSPI is also likely to face additional medium-term corrections."

Meanwhile, the U.S. New York stock market rose as energy-related stocks surged amid mixed economic indicators. On the 15th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 34,814.39, up 0.68% from the previous session. The Standard & Poor's (S&P) index rose 0.85% to 4,480.70. The Nasdaq closed at 15,161.53, up 0.82% from the previous session.

Investors focused on the U.S. economic indicators released that day. The Empire State Manufacturing Index for September, released by the New York Federal Reserve Bank, was recorded at 34.3, a significant increase. This figure far exceeded the expert forecast of 17.5 compiled by The Wall Street Journal (WSJ).

On the other hand, U.S. industrial production in August increased by only 0.4% compared to the previous month, which was lower than economists' expectations of 0.5%. The July industrial production was also revised down from a 0.9% increase to 0.8%. This is attributed to the impact of business closures related to Hurricane Ida.

As the manufacturing index in New York improved significantly, oil prices rose more than 3%, leading energy-related stocks to drive the market.

ExxonMobil and Occidental Petroleum shares rose more than 3% and 6%, respectively. Microsoft (MS) shares rose more than 1% before the market opened after announcing a dividend increase and a $60 billion share repurchase program.

Among sectors, only utility stocks declined, while all other 10 sectors rose. New York stock market experts advised preparing for a market correction.