[Market ING] KOSPI Recovers to 2600 Level, Eyes on US Employment Data

Weekly KOSPI Expected Band 2580~2750 Range

Attention is focused on whether the KOSPI, which recovered the 2600 level last week, can continue its rebound this week (September 30 to October 4). The stock market is expected to be influenced by a series of U.S. economic indicators scheduled for release this week.

[Image source=Yonhap News]

Last week, the KOSPI rose 2.18% and the KOSDAQ increased by 3.5%. The semiconductor sector rebounded on strong Micron earnings, and foreign investors, who had been buying after a long time, pushed the KOSPI up to the mid-2600s. Lee Kyung-min, a researcher at Daishin Securities, explained, "This is because the variables that had been suppressing the KOSPI turned favorable. The causes of the KOSPI's sluggishness were identified as the G2 (U.S. and China) economies, semiconductor industry conditions and earnings uncertainty, and the resulting massive foreign selling. Fortunately, last week, thanks to China's economic stimulus package and Micron's strong earnings, foreign investors switched to net buying after seven trading days."

Although the semiconductor sector, which had been sluggish, successfully rebounded due to Micron's strong earnings, the situation remains uncertain. It is expected that doubts may persist until the third-quarter earnings announcements of Samsung Electronics and SK Hynix scheduled for next month. Shin Seung-jin, a researcher at Samsung Securities, analyzed, "The KOSPI has recovered the 2600 level but has not succeeded in surpassing the pre-August crash index level (2676 points). Although Asian stock markets broadly rebounded after China's economic stimulus announcement, concerns about a peak-out (decline after a peak) in the semiconductor sector, which has a high weighting in our market, continue." He added, "It is positive that concerns about the semiconductor down cycle were temporarily resolved after Micron's favorable earnings announcement. If peak-out concerns are dispelled after the third-quarter earnings announcements of the two major domestic semiconductor companies scheduled for October, a broad market rebound can be expected."

Na Jung-hwan, a researcher at NH Investment & Securities, also said, "With Samsung Electronics recently hitting a 52-week low, Micron's strong earnings have partially resolved the oversupply issue of high-bandwidth memory (HBM), so the rebound will continue mainly in large semiconductor stocks and those with a high HBM weighting." However, he cautioned, "Doubts about domestic semiconductor earnings may continue until the preliminary third-quarter earnings announcement of Samsung Electronics, scheduled for early to mid-October."

This week, with major U.S. economic indicators scheduled for release, the market is expected to focus on them. Researcher Lee Kyung-min said, "This week, the U.S. Institute for Supply Management (ISM) manufacturing and services indices and employment data will be released. These indicators have stirred fears of a U.S. economic recession in August and early September. The ISM manufacturing index (September forecast 47.6, August 47.2) and services index (September 51.5, August 51.5) are expected to remain solid, and the key will be employment. The unemployment rate is expected to hold at 4.2%, but nonfarm payrolls are forecast to slightly slow to 140,000 compared to 142,000 in August." He added, "The gap between ISM and employment data results and consensus (market expectations) is at an all-time high, which will determine not only the volatility of the U.S. stock market but also whether the KOSPI breaks through and stabilizes above the 2700 level."

There is a forecast that the market will show differentiated performance by sector. Researcher Na Jung-hwan said, "With the positive factors of Micron's earnings and China's economic stimulus package, the domestic stock market is expected to attempt sectoral rebounds for the time being. Since large semiconductor stocks have still fallen significantly from their all-time highs, the rebound is expected to continue. Also, stock prices in the steel and chemical sectors are very low, which presents investment attractiveness. We expect a market where sectors with excessive declines attempt to rebound." NH Investment & Securities projected the KOSPI range for this week to be between 2580 and 2750.

Key schedules for this week include the release of China's September manufacturing and services Purchasing Managers' Index (PMI) on the 30th, followed by U.S. Federal Reserve Chair Jerome Powell's speech on October 1, along with the U.S. September ISM manufacturing index, U.S. September S&P Global manufacturing PMI, and U.S. August Job Openings and Labor Turnover Survey (JOLTs). On October 2, U.S. September ADP employment data will be released, followed by the U.S. September ISM services index and U.S. September S&P Global services PMI on October 3, and the U.S. September employment report on October 5. The Korean stock market will be closed on October 1 and 3, while the Chinese stock market will be closed from October 1 to 4.