[Market ING] KOSPI Continues Technical Rebound... Focus on US Inflation Data

KOSPI Expected Band 2650~2770
US April CPI and PPI Scheduled for Release

The stock market this week (May 13?17) is expected to continue its technical rebound despite the scheduled release of the U.S. April inflation data.

[Image source=Yonhap News]

Last week, the KOSPI rose by 1.91%, while the KOSDAQ fell by 0.17%. The KOSPI settled above the 2700 level but failed to surpass the 2750 mark.

Kang Jin-hyeok, a researcher at Shinhan Investment Corp., said, "The KOSPI successfully reclaimed the 2700 level after 16 trading days since April 11, driven by a surge in large semiconductor stocks following the U.S. April employment report, which revived expectations for interest rate cuts. However, hawkish comments from Federal Reserve officials and weakening momentum in U.S. tech stocks limited the market's upside."

Kang Jae-hyun, a researcher at SK Securities, stated, "Recently, as global interest rates stabilized downward, the domestic stock market showed a V-shaped rebound but slipped just before reaching the 2750 level. The short-term rise has increased price pressure, and resistance around the price-to-book ratio (PBR) of 1 appears strong."

Although short-term fluctuations may occur, the KOSPI is expected to surpass the first rebound target of 2750 and attempt to break through the 2800 level. Lee Kyung-min, a researcher at Daishin Securities, explained, "The KOSPI rose intraday to 2749 points on May 9 but reversed downward due to resistance near the first rebound target and previous highs, coupled with large foreign futures selling ahead of options expiration. The 2750 level corresponds to a PBR of 1 based on confirmed earnings, marking a valuation inflection point." He added, "The KOSPI has risen about 200 points from its previous low, and reaching the PBR 1 level means short-term fluctuations should be expected. However, this short-term pause and absorption of selling pressure is an opportunity to prepare for the next target of breaking through 2800."

This week, attention is focused on the market impact of the U.S. inflation data releases. On May 14, the U.S. April Producer Price Index (PPI) will be announced, followed by the April Consumer Price Index (CPI) on May 15. Market forecasts expect the PPI to rise 2.2% year-over-year, core PPI 2.3%, CPI 3.4%, and core CPI 3.6%. Lee said, "April CPI is expected to slow to 3.4% from 3.5% in March, and core CPI is also expected to decrease from 3.8% to 3.6%. The halt in CPI rebound after three months and renewed easing in core CPI will support stability in global financial markets."

It is anticipated that the market will absorb the inflation data smoothly and seek a rebound. Kim Young-hwan, a researcher at NH Investment & Securities, said, "From April, when income tax payments end, through July, seasonal effects cause inflation and consumption to slow. The stock market is expected to digest the U.S. April inflation data without major issues and look for a rebound." NH Investment & Securities projects the KOSPI trading range this week to be between 2650 and 2770.

Key events this week include the release of the U.S. April PPI on May 14, April CPI and retail sales on May 15, and April industrial production on May 16. On May 17, China’s April industrial production, retail sales, fixed asset investment, and the U.S. April Conference Board Leading Economic Index will be announced.

Earnings reports from major U.S. and domestic companies will also continue. Cisco Systems will report on May 15, Walmart on May 16. Domestic companies scheduled to report include SK Networks and Korea Gas Corporation on May 13; Meritz Financial Group, Samsung Fire & Marine Insurance, and CJ CheilJedang on May 14; Samsung Life Insurance on May 15; and Hyundai Marine & Fire Insurance on May 16.