[Good Morning Stock Market] Caution Ahead of FOMC... KOSPI Expected to Start Lower

[Asia Economy Reporter Jang Hyowon] As the New York stock market fell ahead of the Federal Open Market Committee (FOMC) meeting, the KOSPI is also expected to start lower.

On the 30th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,717.09, down 260.99 points (0.77%) from the previous session. The Standard & Poor's (S&P) 500 index fell 52.79 points (1.30%) to 4,017.77, and the Nasdaq index dropped 227.90 points (1.96%) to 11,393.81.

[Image source=Yonhap News]

The New York stock market is analyzed to have seen profit-taking ahead of the FOMC regular meeting scheduled for January 31 to February 1. The market expects the Federal Reserve (Fed) to raise interest rates by 0.25 percentage points at this meeting but is concerned about the possibility that Fed Chair Jerome Powell may adopt a hawkish stance.

Additionally, caution has increased ahead of earnings announcements from big tech companies such as Amazon, Apple, and Alphabet. Apple showed weakness following reports that it would record a sales decline for the first time since Q1 2019 due to reduced production caused by the COVID-19 lockdown shutdown of its Chinese factories in November last year.

Furthermore, major companies such as Nvidia, AMD, Micron, and Applied Materials saw their stock prices fall by 2-4% due to weak front-end demand and increased inventory. The Philadelphia Semiconductor Index also dropped 2.5%.

In this atmosphere, the Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) also fell 1.06% compared to the previous day. The MSCI Emerging Markets Index ETF and Eurex KOSPI 200 futures also declined by 0.3% and 0.17%, respectively. Therefore, the KOSPI is expected to start down about 0.5% on the 31st.

Han Ji-young, a researcher at Kiwoom Securities, said, "The core engine of the January stock rally was the expectation that the Fed would pause interest rate hikes," adding, "The FOMC results, which can gauge how concretely this will materialize, are the most important."

Researcher Han also explained, "Although sensitivity has decreased due to a favorable environment created by macroeconomic inflation slowdown and Fed policy expectations, it is necessary to pay attention to the fact that big tech earnings announcements from Apple, Amazon, and Alphabet, which can influence the overall stock market trajectory beyond individual stocks, are lined up this week."

In particular, there is an opinion that Samsung Electronics' earnings announcement on this day should be noted. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "Samsung Electronics is scheduled to announce its confirmed Q4 and annual results for last year in the morning, and what investors want to confirm during the conference call after the earnings announcement is whether Samsung Electronics, the No. 1 company in the memory semiconductor industry, can resolve questions about 'production capacity management,'" adding, "The recent price increase is partly due to the possibility that Samsung Electronics may tighten chip supply."

Meanwhile, the 1-month New York Non-Deliverable Forward (NDF) won-dollar exchange rate was 1,273.51 won, reflecting which the won-dollar exchange rate is expected to start up about 3 won.