[MarketING] Stock Market Rises to Highest Level This Year After Adequate Rest

KOSPI and KOSDAQ Rise Over 1%
Influenced by Global Stock Market Strength During Holiday Period

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] After the Lunar New Year holiday, the KOSPI started higher, hitting its highest level this year. This appears to be influenced by the strong rise in the U.S. stock market, driven by the possibility of a slowdown in U.S. interest rate hikes during the holiday period and expectations of China's economic recovery.

KOSPI recovers to 2430 level... KOSDAQ reclaims 720 level

As of 10:05 a.m. on the 25th, the KOSPI was at 2431.82, up 36.56 points (1.53%) from the previous day. The KOSDAQ rose 9.85 points (1.37%) to 727.82. During the session, the KOSPI reached 2432.71, marking its highest level this year, and the KOSDAQ settled above 720 for the first time this year, eyeing a recovery above 730.

This is interpreted as being influenced by the strong performance of global stock markets during the Lunar New Year holiday. Over the past three days, the Nasdaq rose 4.44%, the Dow Jones 2.09%, and the S&P 500 3.03%. Japan's Nikkei 225 index also increased by 3.39%.

Seosangyoung, a researcher at Mirae Asset Securities, explained, "During the holiday period, although concerns about economic contraction were highlighted in the U.S. stock market, the increased likelihood of a 0.25 percentage point interest rate hike at the February Federal Open Market Committee (FOMC) led to a positive factor, with the Nasdaq rising over 4%, which is favorable for the Korean stock market." He added, "In particular, the Philadelphia Semiconductor Index, which influences the Korean market, rose 7.5%, and the electric vehicle sector also showed significant gains, improving investment sentiment for related stocks." He continued, "Additionally, while China's 'With Corona' policy may increase inflation, it could have a positive impact on the economy, raising the possibility of a global 'soft landing,' which is also favorable. Considering this, the Korean stock market is expected to start around a 1.5% increase and maintain a steady performance."

Most of the large-cap stocks are showing strength, with semiconductor and electric vehicle-related stocks standing out due to improved investor sentiment. Samsung Electronics rose 2.59%, SK Hynix increased 4.45%, Samsung SDI gained 4.85%, and LG Energy Solution rose 2.13%.

Considering the rise in the U.S. stock market during the holiday, there is a forecast that the KOSPI may attempt to break through the 2500 level. Lee Kyungmin, a researcher at Daishin Securities, said, "Considering the rise in the U.S. stock market during the holiday, the KOSPI seems capable of recovering the 2450 level and attempting to break through 2500." He added, "This is a numerical calculation and individual corporate positive factors should be considered, but given the strong rebound in global stock markets throughout the holiday, a sharp rebound in the KOSPI after the holiday is expected."

Avoid chasing purchases... Time for risk management

Although the market showed a strong upward trend after a pause before the holiday and a break during the holiday, opinions suggest that risk management is necessary rather than chasing purchases.

The researcher said, "Since this is an extension of a rebound driven by expectations, it is recommended not to follow it." He added, "The KOSPI above 2400 exceeds a 12-month forward price-to-earnings ratio (PER) of 12 times, which is significantly above the long-term average. Considering the phase of fundamental slowdown and verification of expectations, it is suggested to reduce stock holdings and increase cash holdings."

There is also a forecast that after showing short-term strength following the Lunar New Year holiday, the market will enter a cautious phase ahead of the February FOMC. Kim Younghwan, a researcher at NH Investment & Securities, said, "The financial market is rising as it confirms strong employment and slowing inflation, but it is also adjusting as it confirms a slowdown in corporate activities and the Fed's continued tight monetary policy, maintaining a box range pattern." He added, "Since the U.S. stock index has risen significantly, the Korean stock market will also show short-term strength after the Lunar New Year holiday, but it is expected to show a cautious trend ahead of the February FOMC near the upper end of the box range."