[Weekly Market Outlook] Focus on US FOMC... Sideways Trend Expected to Continue

This week (18th-22nd), the domestic stock market is expected to maintain a cautious stance as investors focus on the results of the U.S. Federal Open Market Committee (FOMC) meeting scheduled to be announced in the early hours of the 21st (Korean time).

According to the Korea Exchange, the KOSPI index closed at 2601.28 on the 15th, up 53.6 points from the previous week (2547.68). Although it rose on a weekly basis, it has been stuck in the 2500 range for a month. During the same period, the KOSDAQ index fell 20.71 points from 919.74 to 899.03, which is attributed to weakness in the secondary battery sector.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed) [Image source=Yonhap News]

This week, investors' attention is expected to focus on the possibility of additional interest rate hikes in the U.S. The September FOMC meeting, scheduled to be announced in the early hours of the 21st, is virtually expected to confirm a rate freeze. The key issue is whether additional rate hikes will be implemented in November and December. Lee Kyung-min, a researcher at Daishin Securities, said, "The base rate decision at the September FOMC will have limited market impact," adding, "Rather, attention will focus on whether there will be additional rate hikes based on changes in the dot plot, as well as changes in inflation and growth forecasts." He continued, "If the dot plot is revised upward, it will not only increase market disappointment but also amplify concerns about financial system and economic instability caused by additional rate hikes," and added, "Short-term volatility in the global financial market should also be taken into account."

NH Investment & Securities forecasted the weekly KOSPI fluctuation range to be between 2500 and 2630 points. The reduced valuation burden in the recent box range market and expectations for the return of Chinese group tourists (Youke) are positive factors. On the other hand, sluggish exports, difficulties in the U.S. 2024 budget negotiations, and concerns over the expansion of U.S.-China trade conflicts were cited as negative factors.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "Fluctuations within the box range are expected to continue," adding, "In the short term, with reduced KOSPI trading volume and the upcoming Chuseok holiday closure in two weeks, a cautious stance may form among investors." He also said, "Looking further ahead, the lack of high expectations for the Q3 earnings season is another factor lowering market sentiment," adding, "The recent pace of improvement in Korean exports has fallen short of initial expectations, suggesting that companies' earnings guidance for the Q3 earnings season is unlikely to be revised upward, and since the semiconductor industry recovery is delayed, the timing of a strong rebound in the stock market may also be delayed."