[MarketING] KOSPI Keeps Its Course Despite North Korea's Projectile Launch

KOSPI Rises for Third Day... Recovers to 2590 Level Early in Session
Secondary Battery Stocks Strengthen on Tesla-Driven Optimism

The KOSPI rose for the third consecutive day, moving one step closer to the 2600 mark. Although the KOSPI started lower due to geopolitical risks triggered by North Korea's military reconnaissance satellite launch early in the morning, it soon reversed course and climbed to the 2590 level. Analysts suggest that the domestic market's fundamental strength is growing, enabling it to overcome short-term fluctuations caused by negative factors and maintain an upward trend.

KOSPI rises for the third day... recovers to 2590 early in the session

As of 10:15 a.m. on the 31st, the KOSPI stood at 2592.71, up 7.19 points (0.28%) from the previous day. The KOSDAQ rose 6.51 points (0.76%) to 858.01.

[Image source=Yonhap News]

Although the U.S. stock market closed mixed due to difficulties in the debt ceiling vote and slowing economic indicators, the domestic market was driven higher by a tailwind from Tesla and strong performance in secondary battery stocks. On the 30th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.15% from the previous day, the S&P 500 remained flat, and the Nasdaq rose 0.32%.

Han Ji-young, a researcher at Kiwoom Securities, explained, "The U.S. stock market initially rose, led by tech stocks, following reports of a tentative agreement to raise the debt ceiling, but ended mixed due to expected difficulties in finalizing the deal and weak economic data."

Although the debt ceiling negotiations have been tentatively resolved, opposition from hardliners within both the Democratic and Republican parties is expected to make passing the bill difficult. For the bill to be introduced, it requires the approval of the majority of the 13-member House Rules Committee, which consists of 9 Republicans and 4 Democrats. Currently, 2 Republican members oppose the bill's introduction.

The Conference Board Consumer Confidence Index for May recorded 102.3, down from 103.7 in the previous month. The expectations index for future economic conditions also fell slightly to 71.5 from 71.7. The Dallas Federal Reserve Manufacturing Index for May came in at -29.1, significantly below the forecast of -18.0.

Han said, "Despite uncertainties such as the U.S. debt ceiling and the early morning news of North Korea's space launch, the domestic market is expected to maintain an upward trend, supported by the strength of the U.S. Nasdaq. The fact that U.S. stocks related to electric vehicles and EV charging, such as Tesla and Ford, showed strong gains due to individual positive factors like Tesla CEO Elon Musk's visit to China, will also improve investor sentiment for EV charging and secondary battery stocks in the domestic market." Tesla and Ford stocks rose more than 4% in the U.S. market the previous day. Tesla's stock price recovered to $200 for the first time in two months, buoyed by Musk's visit to China.

Accordingly, secondary battery stocks are leading the index rise in the domestic market. LG Energy Solution is up 1.55%, EcoPro BM 4.18%, EcoPro 3.11%, and L&F 3.45%, showing upward momentum.

Impact of negative factors weakens amid fundamental improvements

Although the debt ceiling negotiations have been tentatively resolved, they still act as noise, and uncertainties such as recession concerns remain. However, with fundamentals improving, the downside of the stock market is considered solid.

Han said, "From a medium-term perspective, the reason the domestic market's downside is expected to remain firm despite macroeconomic uncertainties is that earnings momentum is recovering. The 12-month forward operating profit forecast stands at 216.5 trillion won, up about 20 trillion won from the low of 192.8 trillion won in March. It is also noteworthy that the year-on-year growth rate has improved, narrowing from -25.0% in March to -24.1% in April and -19.2% in May."

Short-term volatility expansion is seen as an opportunity to increase exposure. Lee Kyung-min, a researcher at Daishin Securities, said, "The KOSPI has continued its upward trend by overcoming short-term fluctuations caused by negative factors, supported by strong fundamental momentum. Although short-term volatility may increase due to debt ceiling negotiation controversies, additional interest rate hike concerns, and economic instability, the upward trend based on fundamental momentum is developing, so it should be used as an opportunity to increase exposure."