[Good Morning Stock Market] US Mixed Close and Favorable Domestic Environment... KOSPI Expected to Remain Firm

"South Korean Stock Market Volatility Decreasing"

On the 29th, the Korean stock market is expected to start with a slight gain. Last week, while the US stock market closed mixed, a relatively favorable environment was created as the South Korean government's stock market stimulus measures and China's stock market stimulus measures coincided.

On the 26th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,109.43, up 0.16% from the previous session. The S&P 500 index fell 0.07% to 4,890.97, and the tech-heavy Nasdaq index closed down 0.36% at 15,455.36. The S&P 500 had closed at record highs for five consecutive trading days until the previous day but closed lower on this day.

News that the inflation indicator preferred by the US Federal Reserve (Fed) slowed down led to buying momentum, but profit-taking pressure ahead of the weekend and Intel's stock price decline weighed on the market.

In December last year, the core Personal Consumption Expenditures (PCE) price index rose 2.9% compared to the previous year. This was the first time since March 2021 that the core PCE price index fell below 3%. The figure was also lower than the Wall Street Journal (WSJ) forecast of 3.0% and the November figure of 3.2%.

Despite Intel posting better-than-expected results for the fourth quarter, its first-quarter 2024 earnings and revenue guidance fell significantly short of expectations, causing its stock price to drop more than 11%. Nvidia and AMD's stock prices also fell by about 1% and 2%, respectively.

The Korean stock market is also expected to show a slight upward trend this week amid a relatively favorable environment. First, attention is focused on the January Federal Open Market Committee (FOMC) regular meeting. The US Fed is expected to keep interest rates unchanged at this meeting. With recent strong growth, expectations for a rate cut in March have dropped to less than half. Donggil Noh, a researcher at Shinhan Investment Corp., noted, "The January FOMC, lacking justification for a rate cut, is unlikely to have a significant impact on the stock market."

The government's stock market stimulus measures are expected to act as a positive factor. As part of measures to alleviate undervaluation in the domestic stock market, the government plans to introduce a plan to reflect the reality of stocks with low price-to-book ratios (PBR). Long-neglected low-PBR sectors such as banks, utilities, and chemicals are expected to benefit.

China also unveiled large-scale stimulus measures amid concerns over a real estate market slump and deflation (price decline during economic recession). The People's Bank of China, the central bank, announced on the 24th that it would lower the reserve requirement ratio by 0.5 percentage points on February 5, injecting about 1 trillion yuan into the market. Additionally, it revealed plans to establish a 2 trillion yuan stock market stabilization fund to be considered for injection into the stock market.

Researcher Donggil Noh analyzed, "Ahead of the FOMC and big tech earnings, a favorable environment continues with foreign capital outflows returning, government capital market support plans, and China's stock market stimulus measures, leading to reduced volatility in the Korean stock market."