[Good Morning Stock Market] Profit-Taking on 'Low PBR Stocks'... Limited Movement Expected in KOSPI

On the 20th, the KOSPI is expected to show limited movement as profit-taking emerges in the low price-to-book ratio (PBR) sectors that surged sharply the previous day.

The New York Stock Exchange was closed the previous day in observance of Presidents' Day. The United States designates the third Monday of February as Presidents' Day to commemorate the occasion.

European markets showed weakness due to profit-taking after three consecutive days of gains, along with downward revisions to economic growth forecasts in France and Germany and rising recession concerns. The Euro Stoxx 50 fell by 0.05%, the DAX by 0.1%, the FTSE 100 rose by 0.2%, and the CAC 40 declined by 0.01%.

The French government, anticipating an economic slowdown, lowered its economic growth forecast for this year from 1.4% to 1%. It also cut government spending by 10 billion euros, including support for Ukraine and domestic farmers. The factors cited include the Russia-Ukraine war, Middle East conflicts, China's economic slowdown, and Germany's recession.

Earlier, the European Commission significantly downgraded France's growth forecast for this year from 1.2% in November last year to 0.9%, and Germany's growth forecast from 0.8% to 0.3%. At the beginning of this month, the Organisation for Economic Co-operation and Development (OECD) also adjusted France's growth forecast for this year from 0.8% to 0.6%.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) rose 0.63% the previous day. The MSCI Emerging Markets ETF increased by 0.48%.

The market is focusing on the path of U.S. interest rates. Following key events such as the January Federal Open Market Committee (FOMC) meeting, February Consumer Price Index (CPI), and Producer Price Index (PPI), the previous view of six rate cuts within the year has shifted to four to five cuts. Attention is focused on the January FOMC minutes scheduled for the 21st and remarks from Federal Reserve (Fed) officials.

In this process, a key point to watch is whether the direction of the U.S. 10-year Treasury yield, which has risen again to the mid-4.3% range, will provide a rationale for a market pause or correction as it did last week.

On this day, the KOSPI is expected to show limited price movement across the board due to mixed profit-taking and new buying in the low PBR sectors that surged the previous day, amid limited external influences such as the closed U.S. market and European markets that remained flat despite economic concerns.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "From a supply and demand perspective at this point, the main supply and demand player in the domestic market is foreigners, who have net purchased 6.6 trillion won in the KOSPI over the past month, continuing a four-month streak of net buying. Especially, despite the sharp decline in the domestic market in January, foreigners made net buying bets on the Korean market while enduring losses, which gives other supply and demand players such as institutions and individuals expectations that the market bottom will be solid."

Considering that foreign capital inflows this month have concentrated not only on semiconductors but also on low PBR sectors such as automobiles, banks, securities, and utilities, it is judged that these investors also view government-led low PBR policies, including corporate value-up programs, positively.

However, he emphasized, "Some of these funds have purchased low PBR sectors not only to bet on government policy momentum but also to track the performance of benchmark indices such as KOSPI 200 and MSCI Korea Index. Attention should be paid to the fact that short-term price pressure is accumulating in low PBR sectors."