[Good Morning Market] Despite US Market Tailwinds... Domestic Market Expected to Show 'Limited Movement'

Despite the positive momentum from the U.S. stock market, the KOSPI on the 16th is expected to show limited movement due to a lack of momentum to drive the index higher. The previous day, the three major U.S. stock indices all closed higher following news of a decline in retail sales. This was thanks to the recovery of investor sentiment, which had cooled due to inflation indicators, leading to increased buying activity.

On the 12th, global stock markets froze due to concerns over the resurgence of COVID-19, causing the KOSPI index to start with a plunge of over 4%. The three major New York stock indices are displayed in the Hana Bank dealing room in Euljiro, Seoul. Photo by Moon Honam munonam@

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,773.12, up 348.85 points (0.91%) from the previous session. The large-cap-focused S&P 500 index rose 29.11 points (0.58%) to close at 5,029.73, breaking its all-time high. The tech-heavy Nasdaq index finished at 15,906.17, up 47.03 points (0.3%). The rise in indices was driven by the U.S. retail sales data, which was released in the morning and came in much lower than the Wall Street Journal (WSJ) forecast of -0.3%.

The retail sales data is used as an indicator to assess the overall economic trend. A large decline in retail sales suggests that the U.S. economy is cooling faster than the market had expected. This led the market to anticipate an interest rate cut in the second quarter, resulting in buying activity in the stock market that day.

The previous day, the KOSPI closed slightly lower amid selling pressure from foreigners and institutions. Although the New York stock market closed higher overnight as concerns over inflation indicators eased, the KOSPI struggled as low price-to-book ratio (PBR) stocks, which had recently driven the price increase, took a breather.

Hi Investment & Securities Research Center explained, "The domestic stock market closed mixed as rotation continued from low PBR sectors to growth stocks related to artificial intelligence (AI) expectations. The trend shows capital shifting to KOSDAQ growth stocks, and it is important to note the move from sectors that rose on expectations of value-up programs to themes that have been relatively less burdened by valuation, as profit-taking occurs."

Despite the positive momentum from the U.S., the domestic stock market is expected to show limited movement on this day.

Yumi Kim, a researcher at Kiwoom Securities, said, "The KOSPI is expected to show limited movement due to the absence of momentum such as weakening upward momentum in U.S. big tech and semiconductor sectors. To prevent capital outflow from the KOSPI, the strength of shareholder return policies is important. Given that discussions on improving corporate governance are likely to expand sequentially, it is necessary to pay attention to stocks that foreigners are focusing on buying."