[Market ING] KOSPI Drops to 2700s, Will Earnings Turn the Mood Around?

Weekly KOSPI Expected Band 2760~2880 Range

This week (July 22-26), the stock market is expected to focus on whether the KOSPI, which fell below the 2800 level, can rebound. With major companies scheduled to announce their Q2 earnings, a confirmation of solid results is anticipated to support a rebound.

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Last week, the KOSPI fell by 2.15% and the KOSDAQ by 2.14%. After three consecutive days of decline, the KOSPI broke below the 2800 level for the first time in 12 trading days based on closing prices. Lee Kyung-min, a researcher at Daishin Securities, explained, "The KOSPI, which had approached the 2900 level, suddenly dropped below 2800," adding, "With expectations for interest rate cuts peaking, bond yields stagnated due to the Trump re-election scenario, and sector- and stock-specific differentiation intensified based on cost-benefit considerations, increasing downward pressure not only on the KOSPI but also on global stock markets." He further noted, "The U.S. government's semiconductor sanctions against China added to the pressure, causing semiconductor tech stocks and the KOSPI to fall below the 2800 level."

However, the upward trend is not considered to have ended. Cho Joon-ki, a researcher at SK Securities, stated, "The main reason for the current correction and rotation is not political risk but that prices have risen too much, so it is premature to say the upward trend has ended." He added, "Although there are concerns about entering a full-fledged correction phase due to the intense short-term adjustment, the risk of liquidation acting as a negative factor for several months and continuously souring market sentiment is expected to be very limited." He continued, "Since the index direction is still viewed as upward, it is advantageous to consider any corrections as buying opportunities."

This week, with major companies scheduled to announce their Q2 earnings, it is expected that solid results will help reverse market sentiment. Kim Young-hwan, a researcher at NH Investment & Securities, said, "Many U.S. big tech companies are scheduled to report earnings, and major Korean companies such as SK Hynix will also announce their results." He added, "Recently, in the U.S. stock market, expectations for interest rate cuts and the possibility of Trump's re-election have highlighted a correction in big tech and a rise in small- and mid-cap stocks. However, I believe volatility has increased too rapidly in a short period. The big tech earnings announcements are expected to reverse market sentiment and create a virtuous cycle." NH Investment & Securities projected the KOSPI range for this week to be between 2760 and 2880.

The researcher also said, "The rotation trade in the U.S. stock market, which had stimulated volatility in global markets including the KOSPI last week due to the Trump trade, is expected to come to an end. As the influence of the Trump variable weakens this week, if Q2 inflation and the June personal consumption expenditure (PCE) price index slow down, attempts at rebounds in semiconductors, automobiles, and secondary batteries will lead the KOSPI's sentiment reversal."

Key schedules this week include the People's Bank of China announcing the loan prime rate on the 22nd, and South Korea releasing the June Producer Price Index (PPI) on the 23rd. On the 25th, South Korea's preliminary Q2 Gross Domestic Product (GDP), U.S. June durable goods orders, and U.S. Q2 GDP (advance estimate) will be released, followed by the U.S. June PCE price index on the 26th.

Earnings announcements from major U.S. and domestic companies will continue. On the 23rd, Microsoft (MS), Alphabet, Tesla, Visa, and Coca-Cola will report earnings; on the 24th, Qualcomm and Thermo Fisher; and on the 25th, Amazon. Domestic companies scheduled to announce earnings include Samsung Biologics, Samsung C&T, and Samsung Electro-Mechanics on the 24th; SK Hynix, LG Energy Solution, Kia, Shinhan Financial Group, HD Hyundai Heavy Industries, and POSCO Holdings on the 25th; and SK Innovation on the 26th.