[Market ING] KOSPI Expected to Attempt Recovery Above 2700 Level Amid May FOMC Digesting

Weekly KOSPI Expected Band 2570~2700 Points
A Week Full of Events Including Key Economic Indicators and Corporate Earnings Ahead of May FOMC

This week (April 29?May 3), the stock market is expected to experience increased volatility due to the upcoming May U.S. Federal Open Market Committee (FOMC) meeting, key economic indicators, and corporate earnings announcements. However, after digesting these factors, the KOSPI is anticipated to attempt a recovery above the 2700 level.

Last week, the KOSPI rose by 2.49%, and the KOSDAQ increased by 1.77%. The KOSPI, which had been shaken by geopolitical risks stemming from the Middle East, showed signs of stabilization as volatility eased last week. After closing below the 2600 level the previous week, the KOSPI ended last week having regained the 2650 level.

[Image source=Yonhap News]

Jung-hwan Na, a researcher at NH Investment & Securities, explained, "As the Middle East risk that heightened stock market volatility subsided, stock prices rebounded. On the 19th, concerns about escalation in the Middle East rose following news that Israel retaliated against Iran, but since Iran did not take further retaliatory actions, geopolitical risks eased." He added, "The international community, including the U.S., urging both sides to refrain from military conflict also helped reduce risks, and oil prices, which had recently risen amid geopolitical concerns, declined." NH Investment & Securities projects the KOSPI to trade within a range of 2570 to 2700 this week.

The rebound was led by strong performances in semiconductors and secondary batteries. Kyung-min Lee, a researcher at Daishin Securities, analyzed, "The KOSPI, which had fallen below 2600, quickly recovered to 2670 on April 24. The rally in U.S. semiconductor companies, combined with Tesla's surge, fueled strength in semiconductor and secondary battery firms, lifting the KOSPI by about 120 points from its low."

This week’s scheduled U.S. May FOMC meeting is expected to be a factor increasing market volatility. Additionally, key economic indicators and corporate earnings reports will continue to be released. Lee said, "The May FOMC results will be announced at 3 a.m. on May 2, and attention will focus on remarks by Jerome Powell, Chair of the U.S. Federal Reserve. The market is currently sufficiently hawkish (favoring monetary tightening) to price in fewer than two rate cuts." He added, "While volatility due to FOMC caution should be considered, excessive anxiety about monetary policy could be triggered to normalize." Na also noted, "Since the May FOMC will not release a dot plot, the stock market will closely watch how Chair Powell addresses future inflation trajectories and oil price volatility during the press conference."

After processing this week’s scheduled events, the KOSPI is expected to attempt a recovery above the 2700 level. Jaehyun Kang, a researcher at SK Securities, said, "There are many important events this week that could impact the stock market, so volatility may increase. However, I believe the downside risk to the index is limited because the market has already priced in a more hawkish FOMC than before, and the domestic earnings season is progressing quite well. As we move through this week, the KOSPI will likely attempt to regain the 2700 level."

Key scheduled events this week include the release of China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) and the U.S. Conference Board Consumer Confidence Index for April on April 30. On May 1, South Korea’s April trade data, U.S. April ADP private employment, and the Institute for Supply Management (ISM) Manufacturing PMI for April will be announced. The May 2 U.S. FOMC results will be disclosed, followed by the U.S. April employment report on May 3. Earnings announcements from major U.S. and domestic companies will also continue. On April 30, Amazon, Eli Lilly, AMD, and Coca-Cola will report earnings; on May 1, Qualcomm, Pfizer, and Mastercard; and on May 2, Apple and Amgen. Domestic companies scheduled to report include Samsung Electro-Mechanics on April 29; Samsung SDI, Amorepacific, and OCI Holdings on April 30; LG Chem, Hanwha Aerospace, HYBE, and Lotte Chilsung on May 2; and NAVER and EcoPro on May 3.