[Good Morning Stock Market] US Powell Speech Caution... KOSPI Expected to Start Lower

KOSPI Expected to Digest Sell-offs After 0.3% Decline
Avoid 'Buy and Hold' Strategy Amid Anticipated Index Rise

[Asia Economy Reporter Kwangho Lee] The KOSPI is expected to start down about 0.3% on the 10th and then go through a process of digesting sell-offs. Market watchers predict a cautious stance will continue ahead of major events such as Federal Reserve Chairman Jerome Powell's speech and the release of the Consumer Price Index (CPI).

On the 9th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,517.65, down 112.96 points (0.34%) from the previous session. The Standard & Poor's (S&P) 500 index fell 2.99 points (0.08%) to 3,892.09, while the Nasdaq index rose 66.36 points (0.63%) to close at 10,635.65.

Among the 11 sectors within the S&P 500, healthcare, consumer staples, energy, and financial stocks declined, while technology, utilities, and materials stocks rose. Tesla's stock price rose nearly 6% on the day despite last week's news of vehicle price cuts in China. Bed Bath & Beyond, a household goods company that plunged last week amid bankruptcy concerns, surged more than 23%.

[Image source=Yonhap News]

Investors are closely watching the December Consumer Price Index (CPI) to be released on the 12th and the quarterly earnings reports scheduled for later in the week. Having observed a slowdown in wage growth in last week's employment report, investors are likely to seek confirmation of a trend of easing inflation in the December CPI data.

Meanwhile, the domestic stock market is expected to open lower. However, the U.S. stock market showed strength centered on technology stocks as the dollar weakened due to a slowdown in the labor market and U.S. Treasury yields declined, which is expected to have a favorable impact on the Korean stock market.

In particular, Tesla surged sharply on expectations for earnings and potential demand growth, and this helped clearly strengthen stocks related to the electric vehicle industry, such as secondary batteries, which is expected to be a positive factor for related stocks in the Korean market.

Sangyoung Seo, a researcher at Mirae Asset Securities, analyzed, "The won-dollar exchange rate is expected to fall below 1,240 won, and the continued strength of the Korean won could also positively affect foreign investor flows, which is positive for the Korean stock market." However, he added, "The continuous contraction of U.S. employment and the significant decline in the ISM services index, along with other economic indicators that could trigger recession concerns, remain burdensome."

Jiyoung Han, a researcher at Kiwoom Securities, explained, "Looking at the recent trend in the domestic stock market, sharp price increases are occurring mainly in sectors that have recorded earnings shocks such as semiconductors and IT home appliances, and in sectors like chemicals where the business fundamentals have not visibly improved amid downward earnings revisions." She added, "Rather than expecting an index rise and executing a buy-and-hold strategy, a rotation market focusing on trading stocks that are under-supplied or have experienced short-term excessive declines is expected to continue for the time being."