[Market ING] KOSPI Expected to Settle Around 2800 After Short-Term Fluctuations Later This Week

Expected KOSPI Band Between 2750 and 2880

This week’s (June 24-28) stock market is expected to focus on whether the KOSPI can firmly establish itself above the 2800 level.

[Image source=Yonhap News]

Last week, the KOSPI rose by 0.94%, while the KOSDAQ fell by 1.10%. The KOSPI reached the 2800 level on the 20th for the first time in two years and five months but retreated to the 2780 range after giving up the 2800 level the next day. Lee Kyung-min, a researcher at Daishin Securities, explained, "The KOSPI fell back to the 2700 range just one day after recovering the 2800 level for the first time in two years and five months because the strong dollar and the high USD-KRW exchange rate persisted, while the US stock market strength and bond yield stability that had driven the KOSPI’s level-up were shaken." He added, "The Nasdaq and S&P 500, which had been hitting record highs daily, reversed to a decline, and bond yields slightly rebounded, leading to foreign investors selling cash and futures."

The fluctuations between the 2750 and 2770 levels are seen as a small retreat for a greater advance. The researcher said, "I do not believe the KOSPI’s 2800 era ended in a fleeting moment," adding, "By the end of June and early July, the KOSPI is expected to surpass the 2800 level again and level up to the mid-to-high 2800 range because the recent strong dollar that had been holding back the KOSPI is likely to calm down, and the downward stabilization of bond yields is expected to resume."

This week, Micron’s earnings announcement scheduled for the 26th is considered a major event that could impact the stock market. Kim Young-hwan, a researcher at NH Investment & Securities, said, "Micron is set to announce its results for February to May on the 26th, which is an important event as it provides numerical insight into semiconductor market trends for April and May before Korean semiconductor companies announce their Q2 earnings." He added, "Recently, Wall Street has positively evaluated the increase in high-bandwidth memory (HBM) shipments and the rise in prices of general-purpose semiconductors, leading to an upward revision of Micron’s target price. This could raise expectations for Samsung Electronics’ preliminary Q2 earnings announcement in the first week of July."

The US May Personal Consumption Expenditures (PCE) price index, scheduled to be released this week, is also a factor that could influence the stock market. The researcher noted, "May’s PCE and core PCE are expected to rise 2.6% year-on-year, down from 2.7% and 2.8% in April, respectively," and predicted, "This will maintain and strengthen expectations for price stability and accommodative monetary policy." Kim said, "The PCE price index will reaffirm the price stability in May. Since PCE inflation data has already been partially released, investors are more likely to focus on the employment and inflation data for June, which will be announced in the first and second weeks of July, rather than reacting enthusiastically to this." He added, "Considering the stabilization of inflation and the recent continuous increase in new unemployment claims, the June economic indicators are likely to have a positive effect on the stock market."

There is an analysis suggesting that the conditions for an 'Everything Rally'?where prices of all assets rise?have been met. Kim said, "The moderate downward stabilization of US economic indicators, positive expectations for the Federal Reserve’s monetary policy, and strong corporate earnings outlook supported by continuous investments from the federal government and the private sector have come together to reestablish the conditions for an Everything Rally." He added, "If short-term volatility arises due to European political instability or policy risks surrounding the US presidential election, it will be a time to respond with buying." NH Investment & Securities has set the expected KOSPI range for this week at 2750 to 2880.

Key schedules for this week include the release of the US Conference Board Consumer Confidence Index for June on the 25th, the final US Q1 Gross Domestic Product (GDP) figure, US May Durable Goods Orders, and the US presidential election TV debate on the 27th. On the 28th, South Korea’s May Industrial Activity Trends, US May PCE Price Index, and the University of Michigan Consumer Sentiment Index for June will be announced.