[Good Morning Stock Market] US Stocks Close Higher... "KOSPI Expected to Attempt Rebound with Bargain Buying"

Han Ji-young, Kiwoom Securities Research Analyst

[Image source=Yonhap News]

On the 20th, the Korean stock market is expected to seek a rebound through bargain hunting in the semiconductor sector. This follows the overnight rise in the U.S. stock market, which closed higher across the board a day after the Federal Reserve's (Fed) 'big cut'. However, the upper limit of the index is expected to be capped.

On the previous day (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,025.19, up 522.09 points (1.26%) from the previous session. The Standard & Poor's (S&P) 500 index rose 95.38 points (1.70%) to 5,713.64, and the tech-heavy Nasdaq index ended trading at 18,013.98, up 440.68 points (2.51%).

Magnificent 7 (M7) stocks such as Microsoft (up 1.83%), Alphabet (1.46%), Meta (3.93%), and Nvidia (3.97%) showed strong gains together, driving the rally in large-cap tech stocks and supporting the market rise. Apple rose 3.71% as concerns over economic recession eased due to the Fed's rate cut and expectations for iPhone 16 sales increased.

Tesla rose 7.36% as expectations grew that electric vehicle sales, which had been hit by high interest rates recently, would improve following the Fed's big cut. Key real economy indicators are expected to be confirmed only in October, so the market will likely enter a data gap period until then.

An event that could influence market direction is today's Bank of Japan (BOJ) monetary policy meeting for September. One of the triggers for the sharp market decline from mid-July to early August was the BOJ's hawkish rate hike in July (a 15 basis point increase, compared to the market expectation of 10 basis points), which led to a strong yen and unwinding of yen carry trades.

Consensus expects the BOJ to keep rates unchanged at this meeting. The key will be how hawkish the BOJ Governor's stance is during the press conference scheduled for the afternoon. If a more hawkish stance than expected is taken, the pattern of 'yen appreciation → yen carry trade unwinding → sharp market decline' could be repeated.

However, having experienced the Nikkei's over 10% plunge in early August, the BOJ is unlikely to make a sudden policy shift that would cause financial market turmoil. Therefore, it is judged that the BOJ will adopt a hawkish stance within a range that the stock market can tolerate at this meeting as well.

Today, domestic semiconductor stocks are expected to continue facing controversy over peak-out in the industry, but a rebound is anticipated due to strong semiconductor stocks such as Nvidia, Micron (2.2%), and AMD (5.7%) in the U.S. market, along with bargain hunting following the previous day's excessive decline.

On the other hand, sectors such as bio, finance, and automobiles, which surged sharply the previous day, may see short-term profit-taking due to caution ahead of the BOJ policy meeting. Considering this, the overall domestic stock market is expected to experience short-term rotation among the main sectors mentioned above. Additionally, due to cautious sentiment around the BOJ meeting, the stock price movement is expected to show a capped upper limit in the index.