[Good Morning Stock Market] US Stocks Surge... KOSPI Expected to Start Higher

On the 14th, the KOSPI is expected to start higher, supported by the strong performance of the U.S. stock market.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 39,765.64, up 408.63 points (1.04%) from the previous session. The S&P 500 rose 90.04 points (1.68%) to 5,434.43, and the Nasdaq Composite surged 407.00 points (2.43%) to close at 17,187.61.

The U.S. stock market rebounded across the board as small business sentiment improved for the fourth consecutive month and the July Producer Price Index (PPI) came in below market expectations, reviving disinflation expectations. The July PPI rose 0.1% month-over-month and 2.2% year-over-year, both below market forecasts.

As a result, expectations for interest rate cuts increased, and the S&P 500 and Nasdaq indices nearly recovered the gap declines experienced on the 1st and 2nd of this month.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) rose 2.1%, and the MSCI Emerging Markets Index ETF increased by 1.1%. Eurex KOSPI 200 futures closed up 1.3%. Considering these factors, the KOSPI is expected to start higher on the day.

Seokhwan Kim, a researcher at Mirae Asset Securities, said, “The sustained expectation of disinflation in the U.S. raises the possibility of interest rate cuts by the U.S. Federal Reserve (Fed), while also increasing downward pressure on U.S. Treasury yields and the dollar’s value,” adding, “The KOSPI is expected to see a risk-on (preference for risk assets) spread centered on large-cap stocks today.”

Donggil Noh, a researcher at Shinhan Investment Corp., analyzed, “When the 3-year Treasury yield enters the 2.3?2.4% range, the KOSPI risk premium also sharply increases,” and noted, “Domestic stock market investors may view falling interest rates as a positive factor for gains, but if it falls below 2.4%, they should be mindful of the possibility of price adjustments due to economic stagnation.”

Researcher Noh added, “Portfolio strategies favor sectors sensitive to interest rate declines before economic recovery (such as healthcare) or policy beneficiaries (financials),” and said, “If the risk premium further expands, a defensive stock approach focusing on insurance, telecommunications, food and beverage, and utilities is effective.”

Meanwhile, the 1-month Non-Deliverable Forward (NDF) USD/KRW exchange rate in New York is at 1,360 won, reflecting an expected 8 won decline from the previous day at the opening of the USD/KRW exchange rate.