[Weekly Market Outlook] US Tech Earnings Reports... Focus on Korea-US Summit Diplomatic Events

This week (24th-28th), major U.S. tech companies such as Microsoft and Meta are scheduled to announce their earnings. Additionally, President Yoon Suk-yeol is set to visit the United States as a state guest for the first time in 12 years. Due to the large-scale diplomatic event of the South Korea-U.S. summit, stock market volatility is expected to increase.

According to the securities industry on the 23rd, the expected weekly KOSPI band is projected to be between 2500 and 2600 points. Expectations of a turnaround in the memory semiconductor market and the influx of tourists during the holidays in China and Japan are considered positive factors. On the other hand, the upcoming U.S. Gross Domestic Product (GDP) announcement, the Federal Reserve's (Fed) monetary policy, and uncertainties in the U.S. economy are factors that could lead to a decline.

Microsoft's earnings announcement is scheduled for the 24th, and Meta's for the 25th. Domestically, earnings reports are expected from automakers and secondary battery and display companies such as Hyundai Motor, POSCO Holdings, POSCO Future M, Samsung SDI, LG Chem, and LG Display. Depending on the earnings of U.S. tech stocks, which are the upstream industry of Korean IT, expectations for a recovery in semiconductor stocks are likely to increase. Kim Young-hwan, a researcher at NH Investment & Securities, stated, "Recently, earnings forecasts for Korean companies excluding semiconductors have been solid, and there are positive momentum factors expected from companies' future plans (such as POSCO's vertical integration plan related to minerals and LG Display's investment announcement), so the atmosphere regarding the earnings season is not bad."

In particular, it is expected that this momentum will lead to a shift in capital flow from the relatively underperforming KOSPI compared to the KOSDAQ. Lee Hyuk-jin, a researcher at Samsung Securities, said, "As the full-scale earnings season begins, capital flow may shift to KOSPI stocks with improving earnings," adding, "In the KOSDAQ, the capital that had been concentrated in the secondary battery materials sector is expected to diversify into the long-neglected game and bio sectors."

This week also features significant diplomatic events. The South Korea-U.S. summit will be held on the 26th. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "It is necessary to examine the possibility of improving conditions unfavorable to Korea within the U.S. industrial promotion policies during the South Korea-U.S. summit," citing related sectors such as semiconductors, automobiles, and energy. He added, "It is also important to pay attention to the possibility of diplomatic issues arising with countries that are at odds with the U.S. during the summit."

Additionally, South Korea's preliminary Q1 GDP will be announced on the 25th, followed by preliminary GDP figures for the U.S. (27th) and the European Union (28th). All investors' attention is focused on the Fed's movements in relation to these announcements. The market expects that at the Federal Open Market Committee (FOMC) meeting scheduled for the 3rd of next month, a 0.25 percentage point rate hike will establish the terminal rate (5.00?5.25%), followed by a 0.25 percentage point rate cut starting in November. However, uncertainty remains as some within the Fed express dissatisfaction with the pace of inflation slowdown.

Kim Young-hwan of NH Investment & Securities analyzed, "James Bullard, President of the St. Louis Fed, stated in an interview with Reuters that 'the benchmark interest rate should be raised to 5.50?5.75%.' Bullard has played a role as an opinion leader among Fed officials during 2022?2023, so it is difficult to dismiss his view as a mere minority opinion." He added, "Recently, the financial market has been optimistic about the Fed's monetary policy, but if the Fed's stance differs from market expectations, it could act as a noise factor for the stock market."