[Weekly Market Outlook] Stock-Specific Market for the Time Being... Monitoring Volatility in Financial Markets from China

This week (4th to 8th), the domestic stock market is expected to continue a stock-specific trend amid concerns over financial market volatility caused by risks in China's real estate sector.

According to the Korea Exchange, on the 1st, the KOSPI index closed at 2563.71, rising 44.57 points (1.77%) compared to the previous week (2519.14). During the same period, the KOSDAQ index also increased by 2.26%, from 899.38 to 919.74.

Looking at the entire month of August, the domestic stock market showed a weak trend. The KOSPI fell by 76.31 points from 2632.58 at the end of July to 2556.27 at the end of August. The KOSDAQ index also dropped by 16.23 points, from 935.97 to 919.74.

This week, the market is expected to maintain a box range while closely monitoring whether the real estate crisis in China will spread. NH Investment & Securities projected the weekly KOSPI range to be between 2490 and 2610 points. The easing of concerns over additional tightening by the U.S. Federal Reserve (Fed) and expectations for the return of Chinese group tourists (Youke) are considered positive factors. On the other hand, the possibility of increased volatility in the Chinese yuan exchange rate and stock market, as well as a slowdown in KOSPI earnings momentum, are downside risks.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "Recently, in the U.S. financial market, concerns over additional tightening by the Fed have eased as the labor market overheating has subsided, while there is a view that the economy can continue to perform well." He added, "From Korea's perspective, the easing of upward pressure on U.S. interest rates is positive." However, he noted, "If the U.S. labor market contracts, Korea's exports of consumer goods to the U.S. will inevitably be somewhat affected, raising concerns about a delay in the timing of Korea's export recovery." He further stated, "In the short term, the performance of the Korean stock market may lag behind that of the U.S. stock market."

He also said, "While the stock index is likely to remain within a box range with a stock-specific trend continuing, if concerns over Fed tightening ease and the high U.S. interest rate environment somewhat calms down, interest in growth sectors such as internet and healthcare, which have been neglected since the beginning of the year, will increase." He added, "Ahead of the Chinese National Day holiday from late September to early October, interest in Chinese consumer-related stocks is also expected to continue."

Concerns over risks in China's real estate sector remain, and there are calls to closely monitor China's economic situation for the time being. Lee Kyung-min, a researcher at Daishin Securities, said, "Although China's economic slowdown has been partially reflected in the global financial market, if deflation concerns intensify, short-term volatility expansion is inevitable." He added, "Whether the KOSPI breaks through and settles above the 2570 level will depend on the results of China's inflation indicators."