[Market ING] Focus on US Fed Remarks... KOSPI Expected Between 2830 and 2950

This week (15th-19th), the domestic stock market is drawing attention to whether buying sentiment will recover due to the possibility of the U.S. Federal Reserve (Fed) shifting to a rate cut policy and expectations for the second-quarter earnings of major U.S. big tech companies. NH Investment & Securities has suggested a KOSPI band of 2830 to 2950 points.

[Image source=Yonhap News]

According to the Korea Exchange on the 14th, the KOSPI index closed at 2857.00, down 0.18% from the previous week. Although it reached a new intraday high during the week, it fell back to the 2850 level due to the sharp drop in the U.S. stock market on the 12th. Foreign investors sold Samsung Electronics and SK Hynix stocks worth 309 billion KRW and 188.4 billion KRW respectively, pulling the index down. The significant decline in tech stocks such as Nvidia in the U.S. market on the 11th (local time) had a major impact. Samsung Electronics dropped 3.65% the following day, on the 12th.

During this period, foreign investors were net buyers of 1.9932 trillion KRW in the KOSPI market, while individuals and institutions were net sellers of 1.1114 trillion KRW and 446.7 billion KRW respectively.

This week’s stock market is expected to be positively influenced by the possibility of a U.S. rate cut and expectations for second-quarter earnings. Fed Chair Jerome Powell and other Fed officials are scheduled to give speeches this week. This will be an opportunity to gauge the Fed officials’ stance following the release of the U.S. Consumer Price Index (CPI) for June. NH Investment & Securities forecasts the KOSPI index to range between 2830 and 2950 points this week.

Kim Young-hwan, a researcher at NH Investment & Securities, said, “Since several Fed officials are scheduled to speak from the 15th to the 19th, we will be able to confirm any changes in their positions. However, after confirming the stabilization of inflation indicators, the debate over a recession may resurface. On the 16th and 17th, the U.S. retail sales and industrial production data for June will be released, and the market will try to assess whether a rate cut cycle without a recession is achievable.”

However, if the possibility of U.S. stagflation emerges, it could weigh on the stock market.

Kang Jae-hyun, a researcher at SK Securities, analyzed, “Since the market has already priced in expectations for a rate cut in September, it seems difficult for the index to rise to 3000 immediately. If U.S. real economy indicators are poor enough to warrant a rate cut, concerns about economic slowdown will grow, and we cannot be certain that the KOSPI will continue to rise.”

The earnings announcements of major U.S. big tech companies should also be closely watched. Microsoft (MS) and Alphabet are scheduled to report earnings on the 23rd of this month, Apple and Meta on the 24th, and Amazon on the 25th.

The increased possibility of a delay in the implementation of the financial investment income tax (Fintax) is also expected to be a positive factor. On the 10th, former Democratic Party leader Lee Jae-myung stated at a press conference for his party leadership candidacy that he would reconsider the timing of the Fintax introduction.

Researcher Kim Young-hwan said, “Since former Democratic Party leader Lee Jae-myung, who had opposed the Fintax delay citing reasons such as opposition to tax cuts for the wealthy, has expressed willingness to reconsider the timing of the Fintax introduction, if the opposition party’s stance changes, concerns about individual investors exiting the domestic stock market by the end of the year may also ease.”