[Good Morning Stock Market] "Aftershock from Micron... A Differentiated Market Trend Will Unfold Amid Weak Momentum"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The previous day, all three major U.S. stock indices closed lower. The Dow fell by -0.18%, the Nasdaq by -1.19%, and the S&P 500 by -0.42%. Micron's downward revision of its earnings forecast caused the Philadelphia Semiconductor Index to drop by 4.57%, which contributed to the Nasdaq's decline and is expected to weigh on the Korean stock market as well. Additionally, international oil prices rose early in the session due to news of Russia halting crude oil supplies, fueling inflation concerns. Furthermore, the expansion of uncertainties stemming from Russia and the decline in electric vehicle-related stocks have increased the likelihood of weakness in the secondary battery sector, which had recently led gains in the Korean market. However, except for semiconductors and electric vehicles, most sectors in the U.S. market showed resilience, suggesting that ahead of the Consumer Price Index (CPI) announcement, a sector-differentiated market may develop amid a cautious atmosphere. Moreover, if China's inflation indicators, to be released at 10:30 a.m. Korean time, fall below the previous month's figures as expected by the market, it could alleviate high inflation concerns, which would be positive. Based on this, the Korean stock market is expected to start slightly lower, with its direction depending on the continuity of foreign investor flows.

◆ Seosangyoung, Head of Media Content Division at Mirae Asset Securities: "KOSPI Expected to Start Down Around 0.5%"

Yesterday, the Korean stock market was affected by the sharp drop in U.S. Nvidia shares but managed to turn positive in the afternoon, supported by a significant downward revision of the one-year expected inflation announced by the New York Fed. Particularly, the secondary battery sector surged significantly on expectations related to the U.S. Inflation Reduction Act. Ahead of the U.S. CPI announcement scheduled for the 10th, the KOSPI rose by 0.42%, recovering the 2500 level for the first time in two months, driven by foreign investors' net buying in both spot and futures markets. The KOSDAQ also closed up 0.34%.

However, today, the 4.57% drop in the Philadelphia Semiconductor Index due to Micron's guidance downgrade is expected to weigh on the Korean market. Additionally, the rise in international oil prices early in the session amid increased uncertainties from Russia, which led to higher government bond yields and highlighted the possibility of aggressive tightening by the Federal Reserve (Fed), along with the decline in electric vehicle-related stocks, raises the risk of weakness in the secondary battery sector that had recently driven gains in the Korean market. Furthermore, considering the continued slowdown in the OECD leading economic index, concerns about economic contraction persist, dampening investment sentiment toward the export-dependent Korean market, which is another negative factor.

Nonetheless, it is noteworthy that except for semiconductors, electric vehicles, and housing-related sectors, most sectors in the U.S. market showed resilience. This suggests a high likelihood of sector differentiation amid a cautious atmosphere ahead of the U.S. CPI announcement. Moreover, if China's inflation indicators released at 10:30 a.m. Korean time fall below the previous month's figures as expected, it could ease high inflation concerns, which is positive. Based on this, the Korean market is expected to start down around 0.5%, with the extent of change depending on the continuity of foreign investor flows amid sector differentiation.

◆ Han Ji-young, Researcher at Kiwoom Securities: "Differentiated Market to Continue Amid Weak Trends"

Yesterday, the Korean stock market showed relatively strong performance compared to other Asian markets, supported by favorable foreign investor flows and a decline in U.S. expected inflation. However, today, the aftershocks of the sharp drop in the Philadelphia Semiconductor Index due to Micron's negative news and CPI-related caution are expected to result in a weak trend. During the session, depending on the results of China's July producer price index and consumer price index, the stock price movements between domestic inflation beneficiaries and victims are expected to diverge.

The consensus for the U.S. July CPI, scheduled for release tonight, is 8.7% year-on-year on a headline basis, slightly down from the previous week's forecast of 8.8%. This indicates that most market participants expect inflation to have peaked in June (9.1%). However, it is important to note that the expectation of inflation peaking has already been priced into major global stock markets over the past two to three weeks. Therefore, if the July CPI comes in within the expected range (8.7?8.8%), its impact on the stock market will likely be neutral, with market direction depending on Fed officials' assessments of inflation and changes in the probability of a rate hike at the September FOMC meeting.