[Good Morning Stock Market] US GDP Exceeds Expectations... "KOSPI Expected to Start Higher"

Inflation Slowdown... Rising Expectations for Soft Landing
Focus on Hyundai Motor's Dividend Increase
However, Downward Pressure on Battery Stocks Rises

[Image source=Yonhap News]

On the 26th, the Korean stock market is expected to start higher. With the U.S. fourth-quarter Gross Domestic Product (GDP) growth rate exceeding market expectations, and strong earnings from major companies such as Hyundai Motor and LG Electronics the previous day, it is analyzed that the market will show an upward trend centered on large-cap stocks. However, in the case of secondary battery materials, which are the core of the domestic stock market, downside pressure is expected to increase due to highlighted risks of demand and earnings slowdown.

On the 25th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,049.13, up 242.74 points (0.64%) from the previous session. The S&P 500 index rose 25.61 points (0.53%) to 4,894.16, and the Nasdaq Composite Index closed at 15,510.5, up 28.58 points (0.18%).

The U.S. stock market showed a unified upward trend. In particular, the S&P 500 index hit a record high for the fifth consecutive trading day. This was because the U.S. fourth-quarter GDP recorded an annualized growth rate of 3.3%, significantly surpassing the market expectation of 2.0%. The fourth-quarter Personal Consumption Expenditures (PCE) price index rose 1.7% quarter-on-quarter, lower than the previous quarter's 2.6% increase. The core PCE price index, excluding volatile food and energy, was 2.0%, the same as the previous quarter. Although the growth rate was stronger than expected, the inflation slowdown was clear. The growing expectation of a soft landing provided relief to the market.

Hyundai Motor Group Chairman Chung Euisun is delivering a New Year's message about the management strategy and direction for the new year at the New Year's meeting held on the 3rd at Hyundai-Kia Motors Namyang Research Center in Hwaseong, Gyeonggi Province. Photo by Kim Hyunmin, Hwaseong kimhyun81@

The Korean stock market is also expected to start slightly higher, reflecting expectations of U.S. interest rate cuts and strong earnings from Hyundai Motor and LG Electronics. Hyundai Motor announced that its consolidated sales for last year reached 162.6636 trillion won, and operating profit was 15.1269 trillion won. This is the first time Hyundai Motor's annual operating profit has exceeded 15 trillion won. This performance represents a 14.4% and 54.0% increase, respectively, compared to the previous record high sales (142.5275 trillion won) and operating profit (9.8198 trillion won) in 2022, after the introduction of the new accounting standards (IFRS) in 2010.

Particularly, attention should be paid to Hyundai Motor's dividend expansion. Hyundai Motor announced that it will maintain a dividend payout ratio of over 25% and continue to buy back shares at 1% annually for three years. Ji-hyun Kim, a researcher at Kiwoom Securities, explained, "If Hyundai Motor's stock price rises due to its high profitability and shareholder return effects attracting foreign capital inflows, interest in shareholder returns could expand across the entire stock market."

However, investor sentiment toward the battery sector remains a variable. Tesla's stock fell 12% after reporting earnings below market expectations. The domestic stock market is also limited in its upside due to sharp declines and supply-demand outflows in LG Energy Solution, EcoPro Materials, L&F, and EcoPro stocks.

Ji-hyun Kim of Kiwoom Securities explained, "The factors behind the secondary battery sector's weakness include Tesla's poor earnings and the impact of the U.S. presidential election." She added, "As Trump won the New Hampshire primary, increasing the likelihood of becoming the Republican nominee, concerns about the withdrawal of electric vehicle subsidies have been highlighted."