[Good Morning Stock Market] "Domestic Market Expected to Start Flat Before Holiday with Cautious Outlook... Focus on Stocks Rather Than Index"

Industrial Metal Supply Decreases, Demand Expected to Rise
Renewable Energy Theme Regains Attention

[Asia Economy Reporter Park Jihwan] On the 17th, the domestic stock market is expected to maintain a cautious stance ahead of the Chuseok holiday next week. Due to uncertainties in U.S. consumer spending and the cautious sentiment surrounding the upcoming U.S. Federal Open Market Committee (FOMC) meeting during the holiday period, the stock prices are anticipated to show limited movement. Experts advise focusing on sectors and stocks that are likely to achieve strong performance due to intensified supply and demand imbalances rather than on the overall index.

◆ Seosangyoung, Researcher at Mirae Asset Securities = The KOSPI is expected to start flat on this day. The domestic stock market opened higher the previous day but declined due to uncertainties in the market environment, such as the expanding risk related to China’s Evergrande Group. In particular, foreign investors’ large-scale selling of KOSPI 200 futures also acted as a burden on supply and demand conditions. Overnight, although the U.S. stock market showed weakness during the session despite strong retail sales, it narrowed losses toward the end of the session supported by supply and demand factors ahead of futures and options expiration, closing mixed. Especially, the narrowing losses in major tech stocks positively impacted investor sentiment.

Of course, the upcoming Chuseok holiday is a burden. During the holiday period, the U.S. House of Representatives will convene, and conflicts between Democrats and Republicans over the debt ceiling, infrastructure investment, and tax increases may intensify. Additionally, the FOMC is a key point to watch. While the Federal Reserve is unlikely to announce immediate tapering (reduction of asset purchases), uncertainty about whether it will accelerate the pace of interest rate hikes through economic forecasts and dot plots remains a concern.

On this day, the Korean stock market is expected to start flat and maintain a cautious stance rather than showing active changes. Changes are expected due to supply and demand factors such as foreign investors’ futures trends, which have recently driven market changes. Overall, a sector-differentiated market focusing more on sectors than the index is anticipated.

◆ Kim Younghwan, Researcher at NH Investment & Securities = The U.S. Federal Reserve is in a blackout period ahead of the FOMC on the 23rd. There are no major economic indicator releases scheduled, so there are no variables likely to significantly affect investor sentiment. This is why a cautious sentiment is expected to prevail. In the U.S., the Delta variant has peaked and is gradually subsiding, but economic improvements related to this have not been sufficiently confirmed. Therefore, it is judged that the Fed is more likely to officially announce tapering at the November FOMC after confirming economic improvements in September and October rather than at the upcoming September FOMC.

In particular, expectations for U.S. infrastructure investment are stimulating investment sentiment in the green energy sector. Recently, a rally in global non-ferrous metal sectors has occurred due to rising industrial metal prices. This is because, under the decarbonization trend, industrial metal supply is expected to decrease while demand increases. The stimulated investment sentiment in industrial metals implies that interest in the renewable energy theme, which had been sluggish since the beginning of the year, may be re-highlighted.

◆ Han Jiyoung, Researcher at Kiwoom Securities = The Korean stock market is expected to show limited price movement influenced by uncertainties in U.S. consumer spending and cautious sentiment toward the September FOMC. With three consecutive trading days off next week due to the Chuseok holiday, there is also expected to be demand for stock position liquidation in preparation. However, since much of this has already been reflected this week, the downward pressure on the overall market from supply and demand is not expected to be significant. Nevertheless, attention should be paid to the possibility of profit-taking emerging, especially in green energy and political theme stocks that have recently experienced sharp price increases.