[Market ING] Temporary Reflection of Variables After Holidays "Volatility Caution, Could Be a Buying Opportunity"

Weekly KOSPI Expected Band 2520~2630

This week’s (16th-20th) stock market is expected to simultaneously reflect economic indicators such as the US August retail sales and the Federal Open Market Committee (FOMC) results once the Chuseok holiday ends. Securities firms advised caution regarding volatility but suggested approaching it as an opportunity to increase exposure.

[Image source=Yonhap News]

Last week, the KOSPI rose by 1.22%, and the KOSDAQ increased by 3.77%. Investor sentiment recovered mainly in technology stocks, supported by consumer price index (CPI) results that met expectations and comments from Nvidia CEO Jensen Huang that demand for artificial intelligence (AI) chips remains robust. Han Ji-young, a researcher at Kiwoom Securities, explained, "The US August CPI results provided relief to the market, and technology stocks such as Nvidia rebounded, leading to gains in the semiconductor sector, which had been sluggish in the domestic market."

This week, the FOMC and the Bank of Japan (BOJ) monetary policy meetings scheduled consecutively right after the holiday are expected to influence the market. Lee Kyung-min, a researcher at Daishin Securities, said, "An adjustment of the gap between the Fed’s stance on monetary policy and market expectations is inevitable. Additionally, ahead of the BOJ’s policy meeting on the 20th, hawkish remarks from key figures have been coming one after another." He added, "If the KOSPI forms a third-quarter bottom through the process of digesting uncertainties in US-Japan monetary policies and the unwinding of yen carry trade positions after the Chuseok holiday, it will be an opportunity to increase exposure."

Since whether the US is entering a recession has recently been a hot topic in the market, the results of real economy indicators such as US August retail sales and industrial production scheduled for the 17th are also considered important variables. Researcher Han Ji-young said, "The August indicators are expected to show a favorable trend, but if they record a shock, the rate cut at this FOMC is likely to be interpreted as a 'post hoc cut to address a recession.'" She added, "In the same context, the market’s attention will also focus on the performance of FedEx, a logistics company that serves as a global economic barometer." She continued, "Concerns about a US recession will ease over time, and the FOMC and BOJ meetings will bring a neutral or better trend. However, stock prices and supply-demand volatility may temporarily increase." Kiwoom Securities projected the KOSPI’s expected band for this week to be between 2520 and 2630 points.

There are concerns in the market because historically, the stock market often declined after rate cuts, but this time, analysis suggests the market will rise after the rate cut. Shin Seung-jin, a researcher at Samsung Securities, said, "In the past, market declines following rate cuts often occurred when the US economy was weak, but recent economic indicators show a robust situation." He analyzed, "This time, it is more appropriate to view the rate cut as an insurance cut rather than a post-recession response."

Researcher Shin added, "Currently, large semiconductor stocks have adjusted about 30% from their peak, entering a range where further declines are limited." He predicted, "Sectors expected to benefit from the passage of the US Biosecurity Act in the House include bio stocks, secondary batteries where policy uncertainty is easing after the presidential debate, and sectors benefiting from corporate value enhancement programs such as finance, automobiles, holding companies, and high-dividend stocks will lead the overall market rebound."