[Weekly Market Outlook] KOSPI Outlook in a Box Range Amid Lingering Bank Crisis Effects

KOSPI Closes Higher Despite SVB·CS Liquidity Crisis
March FOMC Factors Fade... Range-Bound Fluctuations Expected

[Asia Economy Reporter Minji Lee] This week (March 20-24), the domestic stock market showed high volatility reflecting concerns over the financial soundness of U.S. banks. However, as governments and major banks took on the role of 'firefighters,' the KOSPI regained its footing. Furthermore, following the announcement of the March Federal Open Market Committee (FOMC) results, a sense of relief formed, and the KOSPI closed the session with a slight upward trend.

[Image source=Yonhap News]

According to the Korea Exchange on the 26th, the KOSPI started the week at 2391.87 and rose 0.97% to 2414.96. Liquidity concerns stemming from Silicon Valley Bank (SVB) and Credit Suisse (CS) negatively affected market sentiment, causing the index to drop to the 2370 level early in the week. However, optimism that the U.S. Federal Reserve (Fed) is nearing the end of its rate hikes was reflected as a positive factor, helping the index recover to the 2410 level. Although there was no mention of the expected rate cuts due to concerns over a banking system collapse, attention was paid to the Fed’s indication of a policy shift to stabilize financial markets. Youngjin Ahn, a researcher at SK Securities, said, “The Fed is in a dilemma as ending rate hikes and supplying liquidity to stabilize finance could undermine price stability. While price stability has been the top priority so far, going forward, the Fed will need to intervene in the market to ensure financial system stability.”

This week, the stock market showed a significant rise supported by analyses that the semiconductor industry is still at its bottom. The KRX Semiconductor Index rose more than 6% over the week, with major stocks such as Samsung Electronics increasing by 3.1%, SK Hynix by 4.18%, Hanmi Semiconductor by 24%, and DB HiTek by 17%. The media & entertainment sector also showed strength, fueled by China’s issuance of foreign investment licenses for the first time in three months on the 20th, which included domestic games, expanding expectations for the lifting of the Hanhanryeong (Korean ban on cultural imports). Among major stocks, game companies such as Devsisters (11.5%), Netmarble (8.8%), and T3 (2.2%) rose, while hotel and leisure stocks like Hotel Shilla (5.7%) and Paradise (3.15%) also increased.

Next week, the domestic stock market is expected to continue fluctuating within a box range amid ongoing concerns over the banking system collapse. NH Investment & Securities forecasts the KOSPI band to be between 2300 and 2450. Market experts believe that instability in the U.S. banking system will not escalate into a shock that severely impacts the market. Major banks maintain stable financial soundness, and based on past experience, governments and central banks worldwide are cautious about expanding financial risks. Younghwan Kim, a researcher at NH Investment & Securities, said, “This incident will create differentiated flows across assets and sectors rather than systemic risk. Since the SVB incident, investments have shifted toward digital assets, gold, and major U.S. tech stocks as alternatives to the traditional banking system, so differentiation will continue.”

Investors may want to increase their interest in Chinese economic recovery-related stocks such as steel, non-ferrous metals, and cosmetics. Namjoong Moon, a researcher at Daishin Securities, analyzed, “Even if China’s March manufacturing and services PMI at the end of this month shows weaker results than the previous month, the market optimism for the Chinese stock market will grow, considering the economy has been in an expansion phase for three consecutive months and the expected effects of monetary policies such as reserve requirement ratio cuts.”

Upcoming major events include the start of the first-quarter earnings season, the announcement of domestic March export-import trends early next month, the U.S. March ISM manufacturing index, and the U.S. March employment report. Researcher Younghwan Kim said, “The biggest focus of first-quarter corporate earnings is the quarterly operating profit of Samsung Electronics. For the KOSPI’s 12-month forward EPS to rebound, improvements in semiconductor earnings estimates are crucial. If losses are recorded, supply reduction announcements may follow, which would be linked to a forecast of earnings bottoming out.”