[MarketING] US Inflation Pressure Eases... Expectations for China's Economic Recovery

KOSPI Continues Rising for 6 Consecutive Trading Days
KOSDAQ Attempts to Stabilize Above 900 with Over 1% Gain

The KOSPI has continued its upward trend for six consecutive days. With inflationary pressures in the U.S. easing and renewed expectations for China's economic recovery after a period of stagnation, positive conditions are forming in the stock market.

KOSPI Rises for Sixth Day... Settles Above 2560

As of 10:15 a.m. on the 14th, the KOSPI stood at 2566.29, up 4.63 points (0.18%) from the previous day. The KOSDAQ rose 9.00 points (1.01%) to 903.25.

[Image source=Yonhap News]

This rise in the domestic stock market is influenced by the significant gains in the U.S. stock market the previous day, driven by easing inflationary pressures. On the 13th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed up 1.14%, the S&P 500 rose 1.33%, and the Nasdaq increased 1.99% compared to the previous day.

Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic stock market is expected to show a positive trend due to confirmed inflation decline securing downside rigidity, Nasdaq's strength centered on big tech, and inflows following option expiration rebalancing."

According to the U.S. Department of Labor, the Producer Price Index (PPI) for March fell 0.5% from the previous month, marking the first decline since April 2020. Compared to the same month last year, it rose 2.7%. This was below the market forecast of 3.0% and showed a clear slowdown compared to the previous month's increase of 4.9%. With inflation easing, the Nasdaq rebounded after four trading days, showing a sharp rise centered on growth stocks. Seo Sang-young, a researcher at Mirae Asset Securities, stated, "Following the Consumer Price Index (CPI), the PPI also showed accelerating downward pressure on prices. This suggests that the pace of inflation decline in the second half of the year could unfold faster than expected, increasing the likelihood that the U.S. Federal Reserve (Fed) will hold rates steady after a 25 basis point (1bp=0.01 percentage point) hike in May."

The employment market showed weakness. Last week (April 2?8), new unemployment claims totaled 239,000, exceeding both the forecast of 232,000 and the previous week's 228,000. A researcher said, "The fact that seasonally adjusted claims last week exceeded the pre-pandemic average of 220,000 also weakens the Fed's rationale for tightening. In the short term, additional inflation declines, expectations for the Fed to pause tightening, and constrained short-term interest rate movements will continue to positively impact the stock market."

Renewed Momentum for China's Economic Recovery

Expectations for China's economic recovery, which had stalled due to weak economic indicators in January and February, are now reviving.

Yesterday, China's General Administration of Customs announced that exports in March reached $315.5 billion (approximately 410 trillion KRW), a 14.8% increase compared to the same month last year. This figure far exceeded the market forecast of -7% and marked the first growth in six months. China's export growth rate had remained negative from -0.3% in October last year through February this year. China's imports in March were $227.4 billion, down 1.4%, significantly below the previous month's -10.2% and the forecast of -5.0%. Jung Jeong-young, a researcher at Hanwha Investment & Securities, said, "The March export growth turning positive after six months and greatly exceeding market expectations could change the market's view that China's exports will struggle this year. The expansion of medium- to long-term loan growth reflecting domestic demand sentiment and the turnaround in export growth reflecting external demand will strengthen expectations for accelerated economic recovery in China in the second quarter."

The export recovery is expected to boost confidence in China's economic recovery. Park Sang-hyun, a researcher at Hi Investment & Securities, predicted, "The surprising rebound in the weak export market in March will positively impact the first quarter GDP growth rate and also favorably affect the sluggish normalization trend in China's manufacturing sector."

There is also a view that continuous monitoring of China-related economic indicators is necessary. A researcher explained, "China's March exports provide renewed hope for China's economic recovery momentum, which had stalled due to weak indicators in January and February amid visible U.S. economic recession risks in the second half of the year. It is necessary to check the Baltic Dry Index (BDI) and Eurozone economic indicators, which have recently slowed after rising due to weak Chinese real economy indicators in February."