[Good Morning Stock Market] US Stock Market Growth Slowdown Concerns Decrease... Will KOSPI Gain Upward Momentum?

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] On the 26th (current time), the U.S. stock market closed higher as concerns over an economic recession eased. The Dow Jones Industrial Average closed up 1.61%, while the Nasdaq and S&P 500 indices rose 2.68% and 1.99%, respectively. Accordingly, the domestic stock market is expected to show an upward trend, supported by the rise in the U.S. stock market and an increased preference for risk assets.

Sangyoung Seo, Researcher at Mirae Asset Securities: “Favorable market environment, expecting KOSPI to start rising”

On this day, the domestic stock market is expected to continue its upward trend, supported by the rise in U.S. companies sensitive to the economy. Department store operator Macy's (19%), retail distributors Dollar General (13.7%), and Dollar Tree (21%) closed higher, buoyed by solid earnings and optimistic annual outlooks. With the recession issue, which had been a factor increasing market volatility, easing since the previous day, the domestic stock market is expected to show an upward trend.

Strong earnings reports from major Chinese tech stocks are also favorable. Major Chinese tech stocks Alibaba (14.8%), Baidu (14%), and Pinduoduo (9.45%) all showed gains, with solid earnings playing a key role in their rise. This is expected to boost expectations for the Hong Kong stock market and improve investor sentiment toward the domestic stock market.

NVIDIA (5%) turned positive on expectations of industry expansion related to a surge in data center sales. The previous day, NVIDIA's decline had significantly dampened investment sentiment in related industries in the domestic stock market. Tesla and Apple also rose 7% and 2%, respectively, which is positive. The cancellation of a stock-backed loan for the Twitter acquisition and the maintenance of iPhone production guidance acted as positive factors, expected to stimulate investment sentiment in related component stocks.

Wonil Jung, Researcher at Yuanta Securities: “Bank of Korea to pursue monetary policy focusing on growth”

The Bank of Korea's Monetary Policy Committee raised interest rates by 25 basis points (1bp = 0.01%) yesterday. Although the increase was not large, the fact that this is the second consecutive hike following last month can be interpreted as focusing more on controlling inflation rather than growth.

In the revised economic outlook, the downward adjustment of the growth rate and the upward adjustment of the inflation rate have changed to levels that the market is concerned about. The growth forecast was lowered by 0.3 percentage points from the previous forecast of 3% in February to 2.7%. The inflation rate was revised upward by 1.4 percentage points from the previous 3.1% to 4.5%. The revised inflation level can be interpreted as maintaining inflation above 4% year-on-year for the remaining period.

Notably, the inflation forecast was adjusted more significantly than the growth forecast. This can be interpreted as an intention to pursue monetary policy that places slightly more emphasis on growth rather than responding to inflation in the future. Although the growth forecast is gradually being lowered, considering the slowdown in growth among major countries, it is expected that some level of inflation will be tolerated to promote economic recovery.

The increase in household debt, which fiscal and monetary authorities have jointly mentioned, is also calming down. In particular, the size of debt is decreasing even on a total volume basis, gradually removing the justification for further rate hikes. The debt balance has been declining since December last year. Since the contraction of private credit could reduce economic momentum and recovery, the monetary policy approach in the second half of the year is likely to be cautious.