[Good Morning Stock Market] "KOSPI Expected to Start Lower... Focus on Exchange Rate Changes"

Dollar and Safe-Haven Asset Preference Rise
Won-Dollar Exchange Rate Expected to Threaten 1300 Won Level Again Today
Domestic Stock Market Investment Sentiment Weakens
Won-Dollar Exchange Rate Changes Expected to Impact Market

[Asia Economy Reporter Hwang Yoon-joo] On the 30th, the domestic stock market is expected to start lower. The won-dollar exchange rate is threatening the 1300-won level again today due to the dollar's safe-haven preference, which is likely to dampen investor sentiment.

On the previous day in the New York stock market, the Dow Jones Industrial Average closed up 0.26% from the previous session. The S&P 500, focused on large-cap stocks, fell 0.07%, and the tech-heavy Nasdaq dropped 0.03%, closing slightly down.

Sangyoung Seo, Head of Mirae Asset Securities: "Expecting a Lower Start... Focus on Exchange Rate Changes"

Sangyoung Seo, a researcher at Mirae Asset Securities, stated on the 30th, "The Korean stock market is expected to start down about 0.3%, and attention should be paid to changes in the won-dollar exchange rate."

Researcher Seo analyzed, "The U.S. stock market still carries recession concerns, and the intraday decline is a burden on the Korean stock market. In particular, the Philadelphia Semiconductor Index fell 2.20% ahead of Micron's earnings announcement, which is a factor dampening investment sentiment in related sectors."

Researcher Seo emphasized focusing on the exchange rate that day. He pointed out, "The dollar is strengthening due to safe-haven preference, making won depreciation inevitable. The exchange rate is expected to exceed 1300 won, which could further dampen investor sentiment."

He explained, "This indicates that recession concerns are being reflected in the foreign exchange market, which is negative for foreign investor demand."

He further diagnosed, "The MSCI Korea Index ETF fell 1.54%, the MSCI Emerging Markets Index ETF dropped 0.40%, and the offshore non-deliverable forward (NDF) won-dollar exchange rate for one month is 1301.28 won. Reflecting this, the won-dollar exchange rate is expected to start up by 1 won."

Additionally, he forecasted, "Eurex KOSPI200 futures fell 0.38%, and the KOSPI is expected to start down about 0.3%."

Jiyoung Han, Kiwoom Securities Researcher: "Stock Prices to Show Limited Movement... Focus on Key Economic Indicators such as CPI and Retail Sales"

Jiyoung Han, a researcher at Kiwoom Securities, predicted, "On the 30th, the domestic stock market is expected to show limited price movement due to inflation concerns, worries about the won-dollar exchange rate surpassing 1300 won again, and the burden of the Philadelphia Semiconductor Index decline (-2.2%)."

He expected, "Stocks related to automobiles (such as those affected by German prosecutors' raids), secondary batteries (battery plant reviews), nuclear power, plants, and defense themes, which showed a sharp decline due to individual negative factors the previous day, are expected to show relatively better price performance due to perceptions of excessive decline or policy benefit momentum."

He added, "Since today is the end of the month/quarter/half-year, volatility in supply and demand due to foreign and institutional investors' rebalancing fund inflows and outflows during the day is also expected to increase."

Researcher Han reiterated, "I maintain the view that the direction of the stock market will be determined by the results of key economic indicators scheduled from now until the end of July, such as the Consumer Price Index (CPI), retail sales, and second-quarter GDP."

Events affecting the domestic stock market included the U.S. first-quarter Gross Domestic Product (GDP) announcement and remarks by Federal Reserve Chairman Jerome Powell.

The U.S. Department of Commerce announced on the 29th (local time) that the first-quarter GDP growth rate was finalized at an annualized -1.6%. This is a downward revision of 0.1 percentage points from the preliminary figure of -1.5% released last month.

Researcher Han analyzed, "The final U.S. first-quarter growth rate (-1.6% annualized, consensus -1.4%) was sluggish mainly due to downward revisions in private consumption (+3.1% → +1.8%) amid inflation issues. However, since this consumption data does not reflect the Fed's rate hikes after the second quarter, caution regarding second-quarter private consumption results is increasing."

[Image source=Yonhap News]

Summarizing Fed Chair Powell's remarks at the European Central Bank (ECB) policy forum: 'Inflation control.' He pointed out that the failure to control inflation would be a bigger mistake than the possibility of a recession caused by excessive rate hikes. The ECB President also forecasted that returning to a low-inflation environment would be difficult.

Researcher Han analyzed, "This suggests that central banks worldwide are losing confidence and certainty over time about whether inflation will come within a controllable range."

He stated, "Ultimately, central banks are likely to continue raising interest rates until inflation is controlled from the demand side," adding, "In the process, market participants and real economy agents will have to endure growth slowdowns."