[Good Morning Stock Market] KOSPI Expected to Start Higher... Closely Watching Movements in Chinese Stock Market

[Image source=Yonhap News]

On the 24th, the KOSPI is expected to start in a firm range. During the session, it is likely to be influenced by movements in the Chinese stock market.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 37,905.45, down 96.36 points (0.25%) from the previous session. The S&P 500 rose 14.17 points (0.29%) to 4,864.60, and the Nasdaq Composite increased by 65.66 points (0.43%) to close at 15,425.94.

The New York stock market opened lower due to the dollar index hitting a six-week high and mixed corporate earnings. However, the gains expanded as the dollar index's strength diminished during the session and the U.S. Treasury 1-year and 2-year auctions ended successfully amid strong demand.

Analysts have increased expectations that the U.S. Federal Reserve (Fed) will cut interest rates in the second quarter of this year, which further supported the stock market. According to a survey of 123 U.S. economists, 70% of respondents expect the Fed to lower the benchmark interest rate in Q2. Additionally, about 60% anticipate a total rate cut of 1.0 percentage point this year.

On this day, the situation in the Chinese stock market is also expected to impact the domestic market. The previous day, China announced plans to consider purchasing Chinese stocks by raising 2 trillion yuan (approximately 372 trillion won) to prevent investor panic following recent declines. It is reported that the plan mainly involves mobilizing funds from overseas accounts of Chinese state-owned enterprises to buy Chinese stocks.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) rose 0.7%, and the MSCI Emerging Markets Index ETF increased by 0.9%. Eurex KOSPI 200 futures rose 0.1%. Considering these factors, the KOSPI is expected to start in a firm range.

Han Ji-young, a researcher at Kiwoom Securities, stated, “Although the weakness in U.S. cyclical stocks such as 3M may constrain investor sentiment toward domestic cyclical stocks, the overall positive close of the U.S. stock market and continued buying on perceptions of oversold conditions are expected to support an upward trend.”

He added, “Since the correlation with Chinese markets such as the Hong Kong Hang Seng and Shanghai Composite has temporarily increased since the beginning of the year, the KOSPI is likely to be influenced by their movements during the session. Also, Netflix (1.3%), which reported earnings after the U.S. market close, posted a subscriber surprise (13.12 million, consensus 8.7 million) and a first-quarter earnings surprise, leading to an approximately 8% surge in after-hours trading. This is expected to create a positive supply-demand environment across growth stocks, including domestic online video service (OTT) related stocks.”

Meanwhile, the one-month non-deliverable forward (NDF) won-dollar exchange rate in New York was 1,337.05 won. Reflecting this, the won-dollar exchange rate is expected to start about 4 won higher on the day.