[Good Morning Stock Market] Stock Market Crying and Laughing Over Secondary Batteries... KOSPI Expected to Start Slightly Up

The domestic stock market experienced significant fluctuations the previous day. In the case of the KOSDAQ market, both trading volume and the number of declining stocks reached record highs, while the KOSPI also saw trading volume rank third, indicating high volatility. Profit-taking in secondary battery stocks influenced this trend. On the 27th, the KOSPI index is expected to start with a slight increase, but the extent of both gains and losses is anticipated to widen due to the concentration in the secondary battery sector.

[Image source=Yonhap News]

On the 26th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,520.12, up 82.05 points (0.23%) from the previous trading day. This marks the 13th consecutive day of gains, the longest rally since 1987. Meanwhile, the large-cap-focused S&P 500 index closed down 0.71 points (0.02%) at 4,566.75, and the tech-heavy Nasdaq index ended the day at 14,127.28, down 17.27 points (0.12%).

The S&P 500 and Nasdaq indices briefly rose after Federal Reserve Chairman Jerome Powell left open the possibility of both a rate hike and a pause in September during his press conference. However, following somewhat hawkish remarks favoring monetary tightening, the markets reversed and declined again.

Ultimately, the U.S. stock market closed mixed and near flat after digesting the Federal Open Market Committee (FOMC) meeting. As a result, the impact on the Korean stock market is expected to be limited. However, the market's direction on the day is likely to be determined by whether the concentration in secondary battery stocks continues.

In the domestic stock market the previous day, secondary battery stocks surged sharply early on but gave up all gains to close lower. POSCO Holdings hit an all-time high but declined in the afternoon. Similarly, EcoPro BM's market capitalization grew to 57 trillion won before falling back to 45 trillion won by the close.

Sangyoung Seo, a researcher at Mirae Asset Securities, stated, "The increased volatility in the Korean stock market the previous day is presumed to be a result of changes in the secondary battery sector, which had been experiencing a FOMO (Fear Of Missing Out) driven concentration." He added, "This trend is expected to continue on the 27th as well." He further explained, "In the past, periods of easing FOMO phenomena have been accompanied by repeated sharp rises and falls, leading to increased volatility."

The researcher advised, "In the domestic market, regardless of the FOMC outcome, it is necessary to prepare for the possibility of volatility and aftereffects (such as additional sell-offs and forced margin selling) in secondary battery stocks triggered by the FOMO phenomenon." He also suggested, "At this point, it would be an appropriate alternative to consider increasing exposure to semiconductor, bio, or Ukraine reconstruction-related stocks, which have been overlooked in terms of supply and demand."