[Good Morning Stock Market] KOSPI Expected to Rebound Amid Strong US Nasdaq

On the 29th, the KOSPI is expected to rebound, supported by the strength of the Nasdaq despite the hawkish remarks from Jerome Powell, Chairman of the U.S. Federal Reserve (Fed).

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,852.66, down 74.08 points (0.22%) from the previous session. The Standard & Poor's (S&P) 500 index fell 1.55 points (0.04%) to 4,376.86, while the Nasdaq index rose 36.08 points (0.27%) to close at 13,591.75.

[Image source=Yonhap News]

The market focused on Chairman Jerome Powell's hawkish comments and the Biden administration's potential semiconductor export restrictions on China. Powell reiterated at the European Central Bank (ECB) forum held in Portugal that the majority opinion is for two more rate hikes this year.

Powell expressed a hawkish stance again, mentioning that ▲the possibility of consecutive rate changes remains open at all upcoming meetings, ▲most members want two or more rate hikes, and ▲the strong labor market and high inflation justify a sufficiently tight policy.

However, the market analyzes that about one additional rate hike has been partially priced in. According to FedWatch, consensus has formed with a 25 basis point hike in July (79% probability) followed by a pause in September (69% probability). Like the stock market, the bond market is betting that one more hike will mark the end of the tightening cycle.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 2%. The MSCI Emerging Markets ETF declined by 0.6%.

Han Ji-young, a researcher at Kiwoom Securities, said, “Until the July FOMC, the market will continue to face uncertainty over Fed policy and be exposed to frequent price volatility. However, as the stock market has learned so far, rather than reacting sensitively to central bank officials’ remarks or news flow, it is optimal at this point to respond by monitoring indicators such as the ISM Manufacturing PMI, nonfarm payrolls, and CPI.”

He predicted, “The domestic stock market will rebound, digesting Powell’s remarks, which did not significantly deviate from the existing hawkish stance, amid the strength of the U.S. Nasdaq. From an industry perspective, the fact that U.S. Micron Technology (+0.4%) reported solid quarterly results and showed after-hours gains due to upward guidance driven by strong AI demand is expected to improve investor sentiment toward domestic semiconductor stocks.”

He added, “It is also important to note that the Fed announced all 23 major banks tested under a severe recession stress test met minimum capital requirements. This is expected to create a favorable intraday atmosphere across Asian stock markets, including Korea, where sensitivity to recession risks has recently increased.”

Meanwhile, the New York Non-Deliverable Forward (NDF) 1-month won-dollar exchange rate stood at 1,307.42 won, and the won-dollar exchange rate is expected to start the day in a stable range.