[Good Morning Stock Market] Economic Uncertainty in China... KOSPI Expected to Start Lower

[Image source=Yonhap News]

On the 16th, the KOSPI is expected to start lower due to economic instability in China and hawkish moves in the United States.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,946.39, down 361.24 points (1.02%) from the previous session. The Standard & Poor's (S&P) 500 index fell 51.86 points (1.16%) to 4,437.86, and the Nasdaq index dropped 157.28 points (1.14%) to close at 13,631.05.

The U.S. stock market initially declined amid concerns that the Federal Reserve (Fed) would maintain a hawkish stance, despite improved economic indicators such as retail sales boosting confidence. Additionally, worries about the economy intensified as China's real economy indicators contracted, contributing to the wider decline.

Furthermore, the global credit rating agency Fitch warned of credit rating downgrades for dozens of banks, and comments from some Federal Reserve presidents regarding bank regulations led to a broader sell-off centered on financial stocks.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.88%, and the MSCI Emerging Markets Index ETF dropped 1.14%. As a result, the KOSPI is expected to open down around 0.5% on the day.

Seosangyoung, a researcher at Mirae Asset Securities, said, "The U.S. stock market's decline reflecting China's economic data results amid concerns about the economy is a burden on the domestic stock market. Especially, the fact that most stocks declined except for some with positive news has dampened investor sentiment, which will weigh on foreign demand." He added, "Moreover, hawkish remarks from Fed officials and Fitch's credit rating downgrade warnings for the financial sector will also stir anxiety. Although positive indicators such as U.S. retail sales exceeding expectations exist, considering the weak Chinese economic data and the depreciation of the Korean won, the domestic stock market is expected to open down around 0.5% and then undergo a process of absorbing selling pressure."

Meanwhile, the one-month Non-Deliverable Forward (NDF) won-dollar exchange rate on the previous day was 1,336.57 won. Reflecting this, the won-dollar exchange rate is expected to start about 5 won higher.