[Good Morning Stock Market] Exchange Rate and Bond Yields ↓... Focus on Foreigners Resuming Net Buying

Kiwoom Securities "KOSPI Expected to Start Higher"

[Image source=Yonhap News]

The Korean stock market is expected to start higher on the 3rd. This is due to the decline in the 10-year U.S. Treasury yield and the sharp drop in the won-dollar exchange rate following the more dovish-than-expected remarks by Jerome Powell, Chair of the U.S. Federal Reserve (Fed), on the 1st (local time).

The three major indices of the U.S. New York stock market also closed higher together, digesting the decline in the 10-year U.S. Treasury yield. On the previous day (local time), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 33,839.08, up 564.50 points (1.70%) from the previous session. The S&P 500, focused on large-cap stocks, rose 79.92 points (1.89%) to 4,317.78, and the Nasdaq, centered on tech stocks, increased by 232.72 points (1.78%) to close at 13,294.19.

The first factor influencing the market today is the direction of bond yields. The background of the stock market rebound over the past two days was largely due to the consensus on the timing of interest rate cuts next year being brought forward. Along with this, the U.S. Treasury's disclosure of its bond issuance plan helped resolve uncertainties in long-term bond supply and demand, acting as a positive factor. According to the Treasury’s funding plan by maturity for October to December, issuance volume increased mainly in short-term bonds such as 2-, 3-, and 5-year notes, while issuance of long-term bonds of 10 years or more remained below market expectations. Concerns over fiscal soundness and supply-demand instability, which arose after the announcement of a record $1.7 trillion borrowing plan in the third quarter, have eased.

[Image source=Yonhap News]

The sharp drop in the won-dollar exchange rate also makes the resumption of net foreign buying a key point to watch. On the 2nd, the won-dollar exchange rate closed at 1,342.9 won, down 14.4 won from the previous day. The exchange rate opened at 1,348.5 won, down 8.8 won from the previous day, and closed in the 1,342 won range.

On the previous day, foreign investors turned to net buying in the Korean stock market for the first time in nine trading days, recovering investor sentiment following the November Federal Open Market Committee (FOMC) results. Foreign investors net purchased 141.4 billion won worth of shares in the KOSPI.

Lastly, Apple’s iPad sales are also a market focus, as iPad sales exceeded market expectations. It is expected that the domestic Apple value chain will benefit from this.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "Seasonality in November and December, short-covering buying, and optimism due to the end of tightening are forming. However, with Middle East risks, the temporary budget deadline on November 17, and the Nvidia earnings event on November 21 still remaining, the stock price recovery will likely reach the September level rather than a trend reversal or a V-shaped rebound in growth stocks." She added, "Until Nvidia’s earnings, overseas earnings sensitivity will decrease, and a stock market focused on individual positive factors is expected."