[Market ING] Approaching 2700, Will the KOSPI's Uptrend Continue?

Weekly KOSPI Expected Band 2580~2710 Range

This week (August 19-23), market attention is expected to focus on whether the KOSPI will recover the 2700 level and continue its upward trend. However, since it has risen for five consecutive trading days, there is also an opinion that a phase of cooling down to resolve overheating caused by the sharp rebound may unfold.

[Image source=Yonhap News]

Last week, the KOSPI rose by 4.20%, and the KOSDAQ increased by 2.86%. On the 16th, the KOSPI closed at 2697.23, up 1.99%. Lee Kyung-min, a researcher at Daishin Securities, analyzed, "Last week, the global financial market quickly stabilized. This was because it caught two rabbits: price stability and easing fears of an economic recession." He added, "Following the U.S. July Producer Price Index (PPI) and Consumer Price Index (CPI) coming in below expectations, the July retail sales surprise and a decrease in unemployment claims joined in, creating an optimal combination for the global financial and stock markets."

However, caution is needed against a short-term pullback following the rapid rise. Lee said, "The KOSPI, which had plunged to 2386 points intraday five days ago, is now approaching the 2700 level," adding, "It has rebounded more than 300 points from the low, recovering 61.8% of the decline since July 11." He continued, "This means it has reached an important turning point for a technical and autonomous rebound, so it is necessary to keep in mind the possibility of a short-term pullback, absorption of selling pressure, and a phase of cooling down from overheating caused by the sharp rebound."

Although a short-term pause may occur, the duration is expected to be brief. Shin Seung-jin, a researcher at Samsung Securities, explained, "There may be a short-term pause this week, but it will not last long," adding, "This is because there are no signs of a U.S. economic recession, peak-out in tech companies' earnings, or reduction in investments during this adjustment period." He further stated, "This adjustment is a price correction due to concerns over the unwinding of the yen carry trade rather than fears of a recession. Therefore, now is the time to build a portfolio focused on sectors and stocks that can lead the rebound rather than fearing a decline."

NH Investment & Securities projected the KOSPI range for this week to be between 2580 and 2710. Kim Young-hwan, a researcher at NH Investment & Securities, said, "Since the end of July, the essence of the stock market adjustment was due to concentration and price burden," adding, "Price burden has eased, and the fear of economic uncertainty appears to have peaked, so the stock market is expected to seek a gradual rebound supported by the easing of uncertainty."

Key schedules for this week include the U.S. July Conference Board Leading Economic Index on the 19th, the People's Bank of China’s August Loan Prime Rate on the 20th, South Korea’s July Producer Price Index (PPI) on the 21st, and U.S. July New Home Sales on the 23rd. Additionally, the U.S. Democratic National Convention will be held from the 19th to the 22nd, and the minutes of the U.S. July Federal Open Market Committee (FOMC) meeting will be released on the 22nd. The U.S. Federal Reserve’s Jackson Hole Conference will take place from the 22nd to the 24th.

Lee said, "The minutes of the July FOMC meeting will be released on the 22nd, and the Jackson Hole meeting will continue until the 24th. The theme is 'Reassessing the Effectiveness and Transmission of Monetary Policy,' with Fed Chair Jerome Powell scheduled to speak on the 23rd," adding, "The key will be whether the market can gain reassurance and confidence about monetary policy and the economy through the Fed’s stance." He further noted, "During the process of confirming the gap between market expectations and the Fed’s stance, the KOSPI is likely to undergo a support test around the 2630-2640 level."