[Good Morning Stock Market] 'Buy Korea' Amid Dollar Weakness

Rising Close Anticipating US Stock Market Midterm Election Results
Intraday Sharp Drop Due to Cryptocurrency Negative News but Recovered
South Korean Stock Market Expected to Start Higher Following Weak US Dollar

[Image source=Yonhap News]

[Asia Economy Reporter Junho Hwang] Following the overnight rise in the U.S. stock market amid a weaker dollar, it is forecasted that South Korea's stock market will continue its upward trend on the 9th, following the previous day.

On the 8th (local time), the U.S. stock market opened higher as the dollar weakened ahead of the midterm election results and U.S. Treasury yields declined. However, during the session, the market experienced a sharp drop due to negative news in the cryptocurrency market, but recovered later in the day to close higher. The Dow rose 1.02%, the S&P 500 gained 0.56%, and the Nasdaq increased by 0.49%.

Due to the upward momentum in the U.S. stock market, South Korea's market is expected to open higher. The weaker dollar and lower Treasury yields are anticipated to have a positive impact on foreign investors' participation in the South Korean stock market.

Seosangyoung, a researcher at Mirae Asset Securities, analyzed, "In particular, the Philadelphia Semiconductor Index rose 2.15%, which is favorable for foreign investors who are net buying related stocks." He added, "Considering the NDF dollar/won exchange rate, the won-dollar rate is expected to start down by around 10 won, indicating a continued won appreciation trend, which is also a positive factor for foreign investor demand."

The U.S. midterm elections are expected to result in a Republican victory. According to pre-election polls (Real Clear Politics), the analysis suggests that the Republican Party will hold the majority in both the House and Senate. If the Republicans control both chambers, significant changes to various policies of the Joe Biden Democratic administration are likely. In key areas such as the IRA (Republicans emphasize allied participation vs. Democrats emphasize America First), ESG (Republicans oppose ESG due to excessive regulation and the necessity of fossil fuels), and healthcare services (Republicans are negative toward expanding healthcare coverage such as lowering drug prices), conflicts between the two parties are expected. However, changes in diplomacy with countries like China and Russia are expected to be minimal.

Han Ji-young, a researcher at Kiwoom Securities, stated, "The election results are expected to be announced in the evening Korean time, but the outline will likely emerge from exit polls around 1 to 2 p.m." She added, "News flow related to the midterm elections is also expected to influence the South Korean stock market during the trading session."

Meanwhile, the U.S. stock market experienced a sharp intraday drop due to increased uncertainty in the cryptocurrency market following news that Binance, the world's largest coin exchange, is proceeding with the acquisition of FTX, which is facing a liquidity crisis.

FTX-supported coins such as Solana and its own issued coin FTT experienced a crash due to liquidation issues. As a result, major coins including Bitcoin, as well as exchange-related stocks like Robinhood and Coinbase, declined.

Additionally, the U.S. October NFIB Small Business Optimism Index recorded 91.3 (expected 91.4, previous month 92.1), down from the previous month. The proportion of respondents citing "inflation as the biggest problem" increased. Although the percentage of those planning to increase employment in the next three months decreased, the proportion reporting difficulty in filling positions remained high. The survey analysis stated that inflation, supply chain disruptions, and labor shortages continue to limit many small businesses' capacity to meet demand for their products and services.