[Good Morning Market] 'Inflation Peak-Out' Confirmed by CPI... Will KOSPI Rise Following US Stock Market?

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The U.S. stock market closed higher across all three major indices the previous day as the July Consumer Price Index (CPI) came in below expectations, highlighting the 'inflation peak-out' issue. The Dow rose 1.63%, Nasdaq 2.89%, and S&P 500 2.13%. Additionally, the semiconductor sector led gains after Citigroup mentioned a bottoming-out theory, and the strong performance of large tech stocks with individual positive catalysts clearly drove Nasdaq's upward momentum.

The U.S. stock market's strength centered on tech stocks amid expectations of an inflation peak-out is expected to have a positive impact on the Korean stock market as well. Furthermore, the semiconductor sector, which had recently seen major companies lower their guidance, showed strength following Citigroup's diagnosis that clear bottom signals are emerging, with the Philadelphia Semiconductor Index rising 4.25%, which is favorable. Moreover, the won strengthened as the dollar weakened, with the USD/KRW exchange rate dropping by more than 10 won, which is also a positive factor. The inflow of foreign investors' net futures purchases on the options expiration day could further expand the scale of net purchases by financial investors, which is also positive. In light of this, the Korean stock market is expected to start with a rise of around 1% and continue to strengthen, centered on the semiconductor sector.

◆ Seosangyoung, Head of Media Content Division at Mirae Asset Securities: "Confirmed 'Inflation Peak-Out' in U.S. CPI... Korean Stock Market Expected to Start with Around 1% Rise"

The previous day, the Korean stock market showed weakness as the semiconductor sector fell sharply due to Micron lowering its guidance in the U.S., amid ongoing caution ahead of the U.S. CPI announcement and large-scale foreign futures selling ahead of the options expiration day, combining supply-demand factors. However, sector differentiation was evident as construction and shipbuilding sectors, which received some positive news, showed strength. Due to these factors, the KOSPI closed down 0.90%, and the KOSDAQ fell 1.60%.

Meanwhile, the U.S. stock market's strength centered on tech stocks amid expectations of an inflation peak-out is expected to positively influence the Korean stock market. Additionally, the semiconductor sector, which had recently seen major companies lower their guidance, showed strength following Citigroup's diagnosis of clear bottom signals, with the Philadelphia Semiconductor Index rising 4.25%, which is favorable.

Moreover, the U.S. CPI slowdown led the dollar to weaken against other currencies, with the offshore non-deliverable forward (NDF) market recording the USD/KRW exchange rate at 1296.00 won, indicating a significant won appreciation, which is also positive. Attention should be paid to foreign investor supply-demand on the options expiration day. Considering the scale of financial investors' stock futures, expectations for net buying are rising, and if foreign investors' net futures purchases increase due to the inflation slowdown, the scale of net purchases by financial investors could expand. Taking this into account, the Korean stock market is expected to start with a rise of around 1% and continue to strengthen, centered on the semiconductor sector.

◆ Han Ji-young, Researcher at Kiwoom Securities: "Volatility in Supply-Demand Expected Due to Options Expiration Day... But Market Will Show Solid Trend in Favorable Environment"

The U.S. July CPI released the previous day rose 8.5% year-on-year, below the previous month (9.1%) and expectations (8.7%). The core consumer price index, which was expected to be higher than the previous month (5.9%), also came in below expectations (6.1%), which the market is viewing positively. China's producer price index (4.2%), which greatly influences global inflation, also declined following the previous month (6.1%), making the possibility of an inflation peak-out highly likely. As a result, the probability of a 75 basis point rate hike at the September FOMC dropped from 68% to 42%, reducing the likelihood of a giant step.

With no inflation-related events expected until the Jackson Hole meeting at the end of August (25-27), major countries' stock markets are expected to maintain a neutral or better trend with price resilience. However, since inflation is not completely resolved, it is expected to take considerable time to achieve successful inflation control.

Based on this, the domestic stock market on the 11th is expected to show an upward trend as foreign investor supply-demand conditions improve, centered on large-cap stocks, supported by the easing of inflation surges in the U.S. and China, the sharp rise of growth stocks like Nasdaq, and the sharp drop in the USD/KRW exchange rate. Since the domestic options expiration day is scheduled, intraday volatility in spot and futures supply-demand is expected, but the overall market is likely to show a solid trend supported by a favorable macro environment. Furthermore, the fact that U.S. semiconductor stocks surged together on the back of bottoming perceptions despite weak front-end demand and inventory risks is expected to contribute to improving sentiment in the domestic semiconductor sector, which had been adjusted due to the Micron-related negative news in the previous trading day.