[Good Morning Stock Market] "KOSPI Expected to Start Lower... Respond with Dollar-Cost Averaging if Further Decline Occurs"

On the 22nd, the KOSPI is expected to start lower. This is because investor sentiment has sharply cooled due to the unresolved military conflict issue between Iran and Israel, as well as the diminished expectations for a U.S. interest rate cut within the year. Securities firms predict that the first-quarter earnings reports of domestic and international companies will determine the direction of the stock market.

On the 17th, the status board in the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, displayed the KOSPI, KOSDAQ indices, and the KRW/USD exchange rate. On that day, the KOSPI opened at 619.15, up 9.52 points (0.36%) from the previous session, and the KOSDAQ index started at 839.3, rising 6.49 points (0.78%) from the previous trading day. The KRW/USD exchange rate began at 1,390.0 won, down 4.5 won from the previous day. Photo by Jo Yongjun jun21@

On the 18th (local time), the three major U.S. stock markets closed mixed. On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 22.07 points (0.06%) from the previous trading day to close at 37,775.38. The large-cap-focused S&P 500 index fell 11.09 points (0.22%) to 5,011.12, and the tech-heavy Nasdaq index dropped 81.87 points (0.52%) to 15,601.5. As a result, the S&P 500 and Nasdaq indices continued their five-day losing streak. Jerome Powell, Chair of the U.S. Federal Reserve (Fed), effectively signaled a delay in rate cuts, and comments from Fed officials suggesting that rate hikes could be considered if necessary significantly dampened market expectations for rate cuts.

With the retreat of rate cut expectations and the escalation of geopolitical risks in the Middle East, the domestic stock market also failed to avoid a downward trend. According to the Korea Exchange on the 22nd, the KOSPI closed at 2,591.86 on the 19th of this month, down 89.96 points (3.35%) from the closing price on the 15th. Last week saw strong selling pressure from institutions and foreigners. In the securities market, institutions and foreigners sold a total of 1.1195 trillion KRW and 2.9395 trillion KRW, respectively. The buyers were individuals, who net purchased 1.4185 trillion KRW during the same period.

Since the conflict between Israel and Iran remains unresolved and investment sentiment toward semiconductor stocks has deteriorated, the domestic stock market is expected to continue experiencing volatility on this day.

Kim Seok-hwan, a researcher at Mirae Asset Securities' Digital Research Team, said, "The KOSPI is expected to start down by 0.2 to 0.4% today. The worsening investment sentiment toward semiconductor stocks, including Nvidia, is a factor increasing downward pressure on the domestic stock market. However, the fact that the geopolitical conflict between Israel and Iran is not spreading further and seems to be settling is likely to have a positive effect."

Han Ji-young, a researcher at Kiwoom Securities, said, "This week, the stock market is expected to react sensitively to uncertainties in central bank monetary policies such as those of the Fed and the Bank of Japan (BOJ), the March Personal Consumption Expenditures (PCE) price index, and news flow related to geopolitical tensions originating from the Middle East. Furthermore, since uncertainties about the profit growth of artificial intelligence (AI) stocks are surfacing, it is necessary to pay attention to the increased reliance on the first-quarter earnings season, which is now fully underway."

There is also advice to respond to further KOSPI declines with phased buying. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "If the KOSPI falls further, it should be met with phased buying. The 12-month forward price-to-earnings ratio (PER) of 10 corresponds to 2,530 points. Below that level, the price attractiveness is high. The PER of 10 acted as a strong support line during the short-term bear markets in October last year and January this year. Additionally, the technical indicator Relative Strength Index (RSI) for the KOSPI has entered an oversold phase, which also supports buying at lower prices," he explained.