"US July CPI Release as Turning Point, Stock Market Rebound Momentum Slows" Outlook

On the 28th, the KOSPI index opened at 2,437.57, up 0.91% (22.04 points) from the previous trading day, as dealers were working in the Hana Bank dealing room in Euljiro, Seoul. The won-dollar exchange rate started at 1,306 won, down 7.3 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Hwang Junho] It is forecasted that the rebound momentum of the KOSPI will slow down starting with the release of the US July CPI on the 10th.

According to Hanwha Investment & Securities on the 6th, the KOSPI fell 13.2% over one month, dropping from 2685 at the end of May to 2332 at the end of June. Since then, it has risen to 2451 over the past month, recovering about 33% of the decline.

This rebound is analyzed to be due to ▲strengthened stock attractiveness from short-term excessive decline, ▲credit risk alleviation after the Q2 earnings announcements, and ▲a decrease in US retail gasoline prices.

However, the market direction could change depending on the CPI released this week. The market expectation for the July CPI, to be announced on the 10th, is 'a 0.3% increase month-over-month and an 8.8% increase year-over-year.' Compared to June's '1.3% month-over-month increase,' this suggests a weakening of inflationary pressure. If the July CPI is announced as expected, it is likely to be positive news for the stock market, which welcomed the decline in US gasoline prices.

However, if it exceeds expectations, it could become an unexpected negative factor. The US May CPI announced in June rose 8.6% year-over-year, surpassing the consensus of 8.3%. Subsequently, the year-end US benchmark interest rate forecast increased by 1.0 percentage point from 2.5% to 3.5%. During this process, the global stock market underwent a correction, which began with the rise in gasoline prices.

Seungyoung Park, a researcher at Hanwha Investment & Securities, stated, "Looking at the stock market conditions after the KOSPI's retracement, growth is slowing down and prices are gradually falling," adding, "Under these conditions, cyclical stocks are bound to underperform and will limit the rebound of the domestic stock market."

He continued, "The stock market will seek opportunities in sectors where profits can increase regardless of the economy," and predicted, "It seems likely that the market will be stock-specific until the end of the year and may have already started, so it is necessary to focus on individual stocks rather than stock indices."