[Good Morning Stock Market] KOSPI Shows Sector-Differentiated Trends... Favorable Stock Price Movement

On the 20th, the KOSPI index is expected to show a differentiated market trend by sector and maintain a favorable flow.

[Image source=Reuters Yonhap News]

The previous day, the U.S. New York Stock Exchange was closed in observance of 'Juneteenth National Independence Day' (Monday, June 19). This day marks the complete abolition of slavery in Texas, USA.

European stock markets experienced a sharp decline. Concerns that tightening will continue in July following the European Central Bank (ECB) monetary policy, downward revisions to China's economic growth rate, and a surge in natural gas prices acted as downward factors, causing major European countries' indices to fall by around 1%.

At the ECB monetary policy meeting on the 15th, the benchmark interest rate was raised by 0.25 percentage points from 3.75% to 4.00% per annum, and the inflation forecast was also revised upward to 5.4% for this year, 3.0% for next year, and 2.2% for 2025. In the subsequent press conference, ECB President Christine Lagarde stated, "We are not considering pausing for a moment," and mentioned that "there is a very high possibility of raising rates again in July."

The previous day, the Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell by 0.84%. The MSCI Emerging Markets ETF also declined by 0.34%. Recent data suggest that major stock markets including the KOSPI, S&P 500, and Nasdaq have been in an upward trend for more than five consecutive weeks, but there are also signs indicating the need to prepare for intermittent pauses.

In particular, the ‘Bull-Bear Spread,’ a sentiment indicator for individual investors, recorded +22.5 basis points as of the 15th, the highest since November 2021. A positive value indicates optimism dominance, while a negative value indicates pessimism dominance. Considering that the average value of this indicator was -10 basis points this year, it can be interpreted that investor sentiment has turned optimistic.

Han Ji-young, a researcher at Kiwoom Securities, pointed out, “The fact that both the Korean and U.S. stock markets are forming an upward trend from a technical chart and price perspective remains unchanged. However, market sentiment indicators including the Bull-Bear Spread suggest short-term overheating of stock prices, which poses a dilemma for market participants betting on long positions in the spot market.”

The domestic stock market showed weakness the previous day, pressured by hawkish remarks from U.S. Federal Reserve (Fed) officials and a sharp rise in the won/dollar exchange rate, along with simultaneous selling by foreigners and institutions. Although there will be profit-taking pressure today as well, it is expected to show a differentiated market trend by sector while focusing on China-related issues.

Han said, “During the trading session, whether China lowers the Loan Prime Rate (LPR) (a 10 basis point cut is the consensus) and whether additional consumption promotion policies are implemented will be key points to watch.” He analyzed, “This is because China-related issues (such as the U.S.-China talks and interest rate cuts) can affect the stock prices and supply-demand of leading sectors in the domestic market, such as defense, machinery, steel, chemicals, industrials, and materials.”