After Vacation, KOSPI Soars to 2430 in a Flash... Rally Unfolding on Inflation Peak Theory?

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The domestic stock market, which reopened on the 13th after the Chuseok holiday period, started on an upward trend. The fact that not only the US stock market but also most global stock markets showed gains of around 2-4% during the holiday period is interpreted as a factor improving overall investor sentiment. In particular, the market is focusing on the spread of the inflation peak theory.

On this day, the KOSPI opened at 2,418.59, up 34.31 points (1.44%). After opening, it showed strength by recovering to the 2,430 level by 9:20 a.m. The KOSDAQ also started the session at 790.89, up 13.08 points (1.68%).

Seosangyoung, a researcher at Mirae Asset Securities, said, "Despite hawkish remarks from Federal Reserve (Fed) officials during the Chuseok holiday period, the US stock market continued its upward trend as the dollar weakened, which is having a positive effect on the Korean stock market." He added, "Furthermore, ahead of the US Consumer Price Index (CPI) announcement scheduled for the evening Korean time, the expected inflation has been significantly revised downward, and expectations for inflation stabilization have expanded due to the downward stabilization of global commodity prices and easing supply chain concerns."

The New York stock market closed higher across the board amid expectations of easing inflation ahead of the US August CPI announcement. On the 12th (US Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,381.34, up 229.63 points (0.71%) from the previous session. The Standard & Poor's (S&P) 500 index closed at 4,110.41, up 43.05 points (1.06%). The tech-heavy Nasdaq index ended at 12,266.41, up 154.10 points (1.27%).

In the early session, buying by institutions and foreigners is supporting the stock market's upward momentum. As of 9:16 a.m., institutions are net buying 167.9 billion KRW and 47.1 billion KRW in the KOSPI and KOSDAQ markets, respectively. Foreigners are also purchasing 4 billion KRW and 11.2 billion KRW in the two markets, respectively. On the other hand, individual investors are net selling 170 billion KRW and 54.9 billion KRW in the two markets, respectively.

Among the top market capitalization stocks, Samsung Electronics (2.70%), SK Hynix (2.10%), Samsung SDI (2.63%), NAVER (2.16%), and Kakao (2.16%) are showing strength. Hyundai Motor (-0.50%) and Kia (-1.73%) are declining.

Han Ji-young, a researcher at Kiwoom Securities, said, "Since the CPI scheduled to be announced tonight Korean time is expected to be 8.1% (YoY) according to consensus, it is reasonable to view that US inflation has also shifted to a downward trend." She added, "The Fed has also stated that it will make interest rate decisions based on data before each Federal Open Market Committee (FOMC) meeting, so if the actual figures confirm a slowdown in inflation, there is an expectation that after the 75 basis points hike at the September FOMC, the pace of tightening will be adjusted in subsequent meetings, allowing the stock market to have an additional relief rally."