[Good Morning Stock Market] "US 3 Major Indexes Close Higher Raising Expectations... Won-Dollar Exchange Rate Poses Burden"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The US stock market fluctuated throughout the day but closed higher across all three major indices. The Dow Jones rose 0.06%, Nasdaq 0.21%, and S&P 500 0.23%. This was due to the release of various economic indicators related to employment, manufacturing, and the economy. The mixed positive and negative results led to continuous intraday fluctuations interpreted as differences in interpretation.

Positive aspects included the weekly initial jobless claims coming in at 250,000, below the market expectation of 260,000, marking a decline for the first time in three weeks, and the Philadelphia Fed Manufacturing Index for August rebounding to 6.2, the first increase in five months. On the other hand, existing home sales in July slowed by 5.9% compared to the previous month, marking six consecutive months of decline, and the Conference Board's Leading Economic Index for July fell 0.4% month-over-month, declining for five consecutive months, raising concerns about a recession.

However, the market showed greater concern about economic contraction, leading to a decline in Treasury yields and a stronger dollar. Typically, interest rates and the dollar move in the same direction, but with growing fears of economic slowdown, the market factored in the likelihood that the Federal Reserve's tightening stance would be limited.

By stock, Cisco (5.8%) rose on strong quarterly results and upward guidance for next year, triggering a rebound buying in the semiconductor sector that had plunged the previous day, with On Semiconductor (7.3%), Nvidia (2.4%), AMD (2.2%), and Micron (2.2%) all gaining. Energy stocks such as ExxonMobil (2.4%), ConocoPhillips (3.5%), and Occidental Petroleum (3.0%) showed strength amid robust international oil demand forecasts.

◆ Han Ji-young, Kiwoom Securities Analyst: "Expecting a rebound effect in the US stock market... Limited stock price movement due to won-dollar exchange rate pressure"

Domestic stocks fell nearly 1% the previous day due to the US market correction, China's real economy slowdown, and concerns over the US Inflation Reduction Act, but the decline narrowed thanks to foreign investors switching to net buying during the day amid semiconductor stock strength.

Therefore, on the 19th, the US stock market rebound effect centered on semiconductors such as Micron (2.5%) and Nvidia (2.4%) is expected to be felt, but limited stock price movement is anticipated due to foreign investor supply-demand burdens from the won-dollar exchange rate breaking back above 1,320 won. Additionally, expectations of inflation peaking out and declines in energy prices such as oil are creating a favorable environment for recent inflation-affected and growth stocks. This environment is expected to remain valid going forward, and as confirmed by the strength of value stocks like energy (2.5%) in the US market the previous day, a rotation into major cyclical sectors and stock groups is expected in the domestic market today as well.

◆ Kim Seok-hwan, Mirae Asset Securities Analyst: "KOSPI to start slightly lower... Attention needed on foreign investor supply-demand"

The KOSPI index is expected to start down about 0.5%.

In the US market, concerns about economic contraction intensified, and the dollar strengthened again, pushing the won-dollar exchange rate up to 1,326 won. This is the highest level since April 2009, and depending on intraday foreign investor supply-demand trends, it could rise to 1,330 won. Despite volatility with repeated ups and downs in the US market, MSCI Korea and emerging market ETFs weakened due to the 'exchange rate.' If the dollar's strength continues, the inflow of foreign investors, which greatly influences the direction of the domestic market, will inevitably weaken. Ultimately, it will be important to closely monitor trading movements using derivatives such as futures and options rather than spot trading.