[Good Morning Stock Market] "May Exports Strong... Will It Be a Springboard for KOSPI Rebound?"

The KOSPI is expected to start lower on the 3rd. However, given the positive export indicators from last month, the decline is expected to be limited.

[Image source=Reuters Yonhap News]

On the 31st of last month (local time), the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 38,686.32, up 574.84 points (1.51%) from the previous trading day. The S&P 500 rose 42.03 points (0.80%) to 5,277.51, while the Nasdaq fell 2.06 points (0.01%) to 16,735.02.

The U.S. stock market closed higher, supported by the April Personal Consumption Expenditures (PCE) price index that met market expectations and end-of-month window dressing inflows. The U.S. Department of Commerce announced that the core PCE price index rose 0.2% month-on-month and 2.8% year-on-year in April.

Seokhwan Kim, a researcher at Mirae Asset Securities, explained, "The April core PCE price index increased by 0.2% month-on-month and 2.8% year-on-year, in line with market expectations," but added, "Real personal consumption decreased by 0.1%, falling short of the revised 0.4% increase in March and the market expectation of a 0.1% increase." He further noted, "The Chicago Purchasing Managers' Index (PMI) came in at 35.4, significantly below market expectations, marking the lowest level in four years."

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.5%, and the MSCI Emerging Markets Index ETF dropped 1.0%. Eurex KOSPI 200 futures declined 0.4%. Considering this, the domestic stock market is expected to start lower.

However, with exports showing strong performance, it is expected that a downside support level can be secured. Semiconductor exports in May reached $11.38 billion, a 54.5% increase compared to the same period last year. Among these, memory semiconductor exports, including High Bandwidth Memory (HBM), amounted to $6.86 billion, up 101.0%. Non-memory semiconductor exports were $4.52 billion.

Researcher Kim said, "Last month, the domestic stock market faced significant downward pressure as foreigners turned to net selling in the semiconductor sector for the first time in seven months," but added, "Since exports, especially in semiconductors, are increasing significantly in May, the market's downside rigidity is expected to be high."

Given the favorable export results, the securities industry advises that it is important to devise an investment strategy aligned with earnings forecasts. Daejun Kim, a researcher at Korea Investment & Securities, explained, "The fact that May exports showed favorable results," and added, "Since exports are not shrinking but maintaining an upward trend, there is unlikely to be a significant change in earnings forecasts across sectors." He continued, "Responding to the market according to earnings forecasts remains a valid approach," and emphasized, "Particularly, focusing on industries with strong export performance and unbroken earnings forecasts is expected to be advantageous in terms of performance."