[Good Morning Stock Market] "Nasdaq Decline and US CPI Caution... Limited Movement Expected After Flat Start"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The U.S. stock market closed mixed the previous day. The semiconductor sector fell sharply as Nvidia (-6.30%) plunged on news that its earnings would fall significantly short of market expectations, causing the Nasdaq, which had risen as much as 1.6% during the session, to close down (-0.10%). The Dow ended up 0.09%, while the S&P 500 closed down 0.12%. The 1.61% drop in the Philadelphia Semiconductor Index due to concerns over Nvidia's earnings is expected to weigh on the Korean stock market as well. However, since this impact was partially reflected last week through Western Digital's earnings announcement affecting related companies, the overall effect is expected to be limited. Meanwhile, the New York Fed's significant downward revision of the 1-year expected inflation rate is anticipated to have a positive effect on risk asset preference sentiment. In particular, the expectation of a strengthening Korean won following this news is favorable. Considering this, the Korean stock market is expected to start flat, but as risk asset preference increases, a stock market characterized by changes depending on individual stock issues is likely to unfold.

◆ Seosangyoung, Head of Media Content Division at Mirae Asset Securities: "KOSPI to start flat and continue limited fluctuations"

On the 9th, the KOSPI index is expected to start flat. The Korean stock market fell at the start the previous day after the U.S. employment report on Friday greatly exceeded expectations, highlighting the possibility of aggressive tightening by the Federal Reserve (Fed). However, the decline narrowed as optimism about the U.S. Inflation Reduction Act emerged. Additionally, despite a sharp rise in the USD/KRW exchange rate indicating won depreciation, net buying by foreigners helped reduce the decline. Supported by this, the KOSPI index managed to turn positive with a 0.09% gain, and the KOSDAQ also narrowed its losses to close down 0.09%.

Among these factors, the 1.61% drop in the Philadelphia Semiconductor Index due to concerns over Nvidia's earnings in the U.S. market is expected to weigh on the Korean stock market as well. However, considering that related impacts were partially reflected through AMD and Western Digital's earnings announcements last Friday, the overall effect is expected to be limited.

Furthermore, the New York Fed's significant downward revision of the 1-year expected inflation rate is expected to positively influence risk asset preference sentiment. This is because it could partially ease the Fed's aggressive rate hike stance. Following this news, the dollar and U.S. Treasury yields fell, and the NDF USD/KRW exchange rate recorded 1300.18 won, suggesting the exchange rate will start down about 7 won, indicating an expected strengthening trend of the Korean won, which is favorable. Considering this, the Korean stock market is expected to start flat but continue limited fluctuations while focusing on individual stock issues amid increased risk asset preference sentiment.

◆ Han Ji-young, Researcher at Kiwoom Securities: "Despite favorable macro environment, limited movement expected ahead of U.S. CPI release"

The domestic stock market is expected to show limited price movement due to caution ahead of the U.S. CPI release on the 10th, despite some favorable macro factors such as a slowdown in U.S. expected inflation and a decline in the USD/KRW exchange rate (currently around 1299 won offshore). Weakness in U.S. semiconductor stocks is also expected to contribute to this limited movement. The strength in U.S. eco-friendly stocks such as electric vehicles and solar power, driven by news of the U.S. Inflation Reduction Act (large-scale investments in solar power and batteries, eco-friendly tax credits, etc.), could have a positive impact on related domestic stocks. However, it should be noted that some of this effect was already partially reflected in the domestic market in the previous trading session. Considering this, the domestic market today is expected to show a differentiated stock market within sectors depending on individual earnings and issues.