[Good Morning Stock Market] US and Middle East Unrest... KOSPI Expected to Rebound Limitedly

On the 17th, the KOSPI is expected to move under the burden of domestic and international macroeconomic uncertainties and escalating geopolitical tensions in the Middle East. However, a limited rebound is anticipated due to bargain hunting following the sharp decline the previous day.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 37,798.97, up 63.86 points (0.17%) from the previous session. The Standard & Poor's (S&P) 500 index fell 10.41 points (0.21%) to 5,051.41, and the Nasdaq index dropped 19.77 points (0.12%) to 15,865.25.

The New York stock market closed mixed after fluctuating throughout the session amid continued investor anxiety over geopolitical risks in the Middle East. After Iran attacked mainland Israel, Israel did not immediately retaliate, easing the possibility of a full-scale war. However, Israel continues to express its intent for retaliation.

Additionally, concerns over the Federal Reserve's (Fed) hawkish stance also weighed on the market. Fed Chair Jerome Powell mentioned the possibility of a delayed rate cut, stating that it may take longer than previously expected to gain greater confidence that U.S. inflation has fallen to 2%.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 1.6%, and the MSCI Emerging Markets Index ETF declined 1.3%. In contrast, Eurex KOSPI 200 futures rose 0.3%. Considering this, the KOSPI is expected to start the day in a slightly positive range.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, “Investor sentiment has been dampened by concerns over domestic and international macro uncertainties and geopolitical tensions, but some bargain hunting will be effective.” He added, “However, in the absence of clear momentum, buying will be more cyclical than trend-driven.”

Han Ji-young, a researcher at Kiwoom Securities, stated, “Despite Fed Chair Powell’s cautious remarks on inflation and the resulting rise in U.S. interest rates, the rebound in AI stocks such as Nvidia (1.6%) and AMD (2.0%) is expected to limit the decline in the U.S. stock market and attempt a rebound.” She added, “During the session, attention will be paid to whether there is excessive decline and technical buying inflows, as well as changes in the won/dollar exchange rate, with differentiated market performance centered on export sectors expected.”

She further analyzed, “Although the high exchange rate, which touched the 1,400 won level against the dollar the previous day, is a burden across the index, it will be an opportunity factor for export sectors.” She concluded, “The exchange rate effect is expected to benefit sectors such as semiconductors, IT, automobiles, and machinery.”

Meanwhile, the one-month Non-Deliverable Forward (NDF) won/dollar exchange rate in New York stood at 1,388 won, suggesting that the won/dollar exchange rate is expected to start the day down by 7 won.