[Good Morning Stock Market] Focus on China's Service Industry Index... KOSPI Expected to Start Higher

In the market, attention is focused on the Caixin Services Purchasing Managers' Index (PMI) for China, which will be announced on the morning of the 5th. The expected figure is 56.2, slightly down from the previous month’s 57.1.

On the 5th, the Korean stock market is expected to start with a slight rise. With the US stock market closed for Independence Day, it is likely to be influenced by the changes in China's Caixin Services Purchasing Managers' Index (PMI) announced during the trading session.

On the previous day (local time), European stock markets showed strength early in the session but closed lower after Germany's exports and imports both fell short of expectations. This is interpreted as a reaction to concerns about economic slowdown ahead of the earnings season.

Germany's trade surplus for May recorded 14.4 billion euros, significantly below the forecast (17.5 billion euros) and the previous month (16.5 billion euros). Exports decreased by 0.1% compared to the previous month, falling short of the expected increase (+0.3%). The decline was largely due to a 1.5% drop in exports to the European Union (EU) and a 3.6% decrease in exports to the United States. Conversely, exports to China and the United Kingdom increased by 1.6% and 5.8%, respectively.

The weakness in Germany's trade balance is noteworthy as it signals economic contraction. Since the second half of last year, Europe has shown signs of economic improvement due to the sharp drop in natural gas prices, which alleviated the energy crisis. At that time, clear improvements in economic indicators led to a trend of euro strength and dollar weakness, serving as a positive factor for European stock markets. However, if concerns about Germany's economic contraction grow as they are now, risk asset preference may weaken.

However, like the US, Germany's service sector remains robust. Recently, German retail sales increased by 0.4% compared to the previous month. In particular, the number of tourists surged to 2.7 million, up from 2.13 million the previous month. Reflecting this, although the index turned downward, the decline was limited.

The factor that will influence the domestic stock market is the Caixin Services PMI of China, which will be announced at 10:45 AM. Depending on the results, expectations for the Chinese government's active stimulus measures may rise, or concerns about the economy may be highlighted. The market forecasts a slight slowdown to 56.2 from the previous month’s 57.1.

Attention should also be paid to foreign investor flows. Foreign investors continue to net buy Samsung Electronics but are selling in the Korean market overall. This differentiated trading trend could pose a burden on the Korean market.

However, considering the Non-Deliverable Forward (NDF) won-dollar exchange rate, the won-dollar rate is expected to start lower today, indicating a strengthening of the won, which is a positive factor.

Seo Sang-young, Head of Media Content at Mirae Asset Securities, stated, "The won-dollar exchange rate is expected to start down by 8 won, and the KOSPI is expected to start with a slight rise." He added, "After the announcement of the Chinese Services PMI, attention will be focused on the Chinese stock market, and changes are expected."