[MarketING] US Monetary Policy Uncertainty Persists... This Week's Range-Bound Market

This week (3rd to 7th), the domestic stock market is expected to be positively influenced by optimistic earnings forecasts from major US big tech companies. However, due to ongoing uncertainties surrounding the US Federal Reserve (Fed) monetary policy, the Korean stock market is likely to continue fluctuating within a range-bound pattern.

On the 24th, the KOSPI index opened at 2693.65, down 28.16 points (1.03%) from the previous trading day, as dealers were working in the Hana Bank dealing room in Jung-gu, Seoul. The won-dollar exchange rate started trading at 1369 won, up 6.6 won from the previous trading day. Photo by Kang Jin-hyung aymsdream@

According to the Korea Exchange on the 2nd, last week (May 27th to 31st), the KOSPI index closed at 2,365.52, down 51.08 points (1.90%) from the previous week. During this period, individual and institutional investors net bought 2.4175 trillion KRW and 785.1 billion KRW respectively in the securities market, while foreign investors showed a net selling dominance of 3.2246 trillion KRW. Over the same period, the KOSDAQ index closed at 839.98, up 0.57 points (0.07%).

The rise in the US 10-year Treasury yield to the 4.6% range, caused by weak demand for US government bonds and hawkish remarks from Fed officials, is interpreted as having dampened investor sentiment toward global risk assets.

Shin Seung-jin, Senior Research Fellow at Samsung Securities, analyzed, "Foreign investors showed net purchases of about 19 trillion KRW in the KOSPI from January to April, but turned to net selling (-1.3 trillion KRW) in May. The rise in market interest rates has weakened the net buying trend of foreign investors, resulting in a continued sluggish trend in the domestic stock market."

NH Investment & Securities has projected the KOSPI expected band for this week to be between 2,580 and 2,700 points. While strong earnings reports from US big tech companies could act as a factor for stock price increases, uncertainties in Fed monetary policy remain a burden for the KOSPI.

Kim Young-hwan, a researcher at NH Investment & Securities, stated, "Recently, concerns about delayed rate cuts or additional rate hikes and fears of a recession have appeared simultaneously in the US. Inconsistent information about the US economic situation is also lowering investors' ability to predict financial markets."

There is also an opinion that if there is no expectation of a Fed rate cut, a strategy following earnings estimates should be adopted. Lee Jae-man, a researcher at Hana Securities, said, "If there is no expectation of a Fed rate cut, following earnings estimates and increasing weights in sectors with upward revisions in earnings estimates remain valid. Within the S&P 500, media, semiconductors, and retail sectors, and within the KOSPI, semiconductors, non-ferrous metals, and transportation sectors have seen earnings estimates revised upward for two consecutive months."

Daishin Securities advised that times of market fear should be seen as buying opportunities. Lee Kyung-min, a researcher at Daishin Securities, said, "As we check the US May ISM manufacturing index and employment data this week, concerns about inflation and monetary policy are likely to ease. Strengthening export momentum from Korea and China could provide another driving force for a KOSPI rebound, so increasing stock exposure by leveraging fear sentiment below the 2,650 level on the KOSPI is a valid strategy."