[Good Morning Stock Market] 'Easing Tightening' Breeze from Europe vs WEMIX Delisting

US Stock Market Closed for Thanksgiving
Europe Mentions ECB Tapering Pace Adjustment
Wemix Delisting, Negative Outlook for Gaming Stocks

[Asia Economy Reporter Ji Yeon-jin] While the U.S. stock market was closed on the 24th (local time) for the Thanksgiving holiday, European markets closed higher amid expectations that the European Central Bank (ECB) would slow the pace of tightening. The domestic stock market is also expected to show strength due to the easing of tightening measures in various countries. However, in the case of game stocks, a differentiated market is anticipated as some stocks, such as Wemade, fell following the decision to delist the virtual currency WEMIX issued by Wemade from domestic virtual exchanges.

Earlier, the minutes of the ECB's October monetary policy meeting, released the previous day, confirmed a consensus on the need for further rate hikes due to concerns over prolonged inflation. Germany's November IFO Business Climate Index came in at 86.3, exceeding expectations and reflecting hopes for economic improvement.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = With the U.S. stock market closed, the ECB’s indication through the minutes that it would slow the pace of rate hikes following the U.S. Federal Reserve (Fed) is expected to have a favorable impact on the Korean stock market. Additionally, Germany’s November IFO Business Climate Index showed a positive result, supported by improved expectations, which is also encouraging.

It is also important to note that the recent State Council executive meeting in China announced measures to strengthen economic stimulus and hinted at a timely reserve requirement ratio (RRR) cut. Historically, the People’s Bank of China has announced RRR cuts within days after such State Council announcements, so an RRR cut is expected as early as today or by December at the latest. Considering this, the Korean stock market is expected to start with a slight rise and maintain a solid trend amid a stronger Korean won.

◆ Jiyoung Han, Researcher at Kiwoom Securities = Today, the domestic stock market is expected to show a limited upward movement due to cautious sentiment surrounding the early closure of the U.S. stock market and the results of the Black Friday shopping season, as well as technical resistance levels being reached. This will likely result in differentiated performance across sectors. From a sector perspective, it is notable that the four major domestic cryptocurrency exchanges, including Upbit and Bithumb, decided to delist certain cryptocurrencies due to circulation volume violations last night. This is expected to increase volatility in game stocks, which had recently shown positive price trends due to Saudi investments and expectations of lifting China’s Hanhanryeong (Korean Wave ban).

The minutes of the ECB’s November monetary policy meeting, released the previous day, confirmed that most members agreed on slowing the pace of rate hikes based on future economic and inflation outlooks. Ultimately, regarding policies of major central banks such as the Fed and the Bank of Korea, market participants will need to focus not on the pace of hikes but on the final level of interest rates. Although the final rate issue began to be reflected in the market after the November FOMC, it has not yet fully materialized. The full-scale reflection is expected to start from mid-next month, following the November CPI and the December U.S. Federal Open Market Committee (FOMC) meeting.

It is important to note that changes in market interest rates and corporate interest expenses caused by additional rate hikes expected until the Monetary Policy Committee meetings in January and February next year could affect next year’s KOSPI net profit forecasts and valuations. The momentum from the third-quarter earnings season has subsided, and downward revisions to earnings forecasts are expected to continue for some time, which the market largely acknowledges. However, issues related to downward revisions in earnings forecasts due to tightening-driven front-end demand and rising interest rates will likely be key factors determining the future direction of the stock market.