Korea Investment & Securities Report
Trading Opportunities in Gyeonggi Consumer Goods and Finance
Due to concerns over a global economic slowdown and escalating tensions in the Middle East, sectors that had underperformed in the stock market are expected to engage in price adjustments. In particular, trading opportunities are anticipated to arise in the consumer discretionary and financial sectors.
On the 7th, Kim Dae-jun, a researcher at Korea Investment & Securities, stated in a report, "The strong U.S. economy and rising interest rates will impact sectoral performance," adding, "Cyclical sectors, which had been suppressed in the short term, are likely to start adjusting their stock prices." Cyclical sectors refer to stocks whose performance depends on the economy or product prices.
This follows better-than-expected U.S. employment data that attracted market attention. Nonfarm payrolls increased by 254,000, significantly exceeding the forecast (150,000) and the previous month’s figure (159,000). The unemployment rate also fell to 4.1% for the second consecutive month.
Researcher Kim noted, "Especially positive was the decline in the three major indicators," and added, "The hourly wage growth rate rose 4.0% year-over-year, indicating a strong labor market."
The bond market reacted to the employment data that surpassed expectations. U.S. Treasury yields rose across all maturities, with short-term yields increasing faster than long-term ones. The 2-year Treasury yield, linked to policy rates, surged by 21.6 basis points to 3.92%, while the 10-year yield rose 12.1 basis points to 3.97% compared to the previous day.
Kim explained, "The sharp change in market interest rates reflects expectations that the upcoming U.S. Federal Reserve (FOMC) meeting in November will yield results different from forecasts," adding, "At minimum, it is expected that the benchmark interest rate will move along the path indicated by the Fed."
This is why investor sentiment has revived. Kim said, "Last week, despite strong private employment data from Automatic Data Processing (ADP) that did not weaken risk asset preference, the increase in nonfarm payrolls led the stock market to move positively," and explained, "Although market uncertainty has not completely disappeared, the stock market has begun to interpret the strong economic indicators as a positive factor and is starting to find direction."
With big tech recovering, cyclical sectors sensitive to economic trends also moved upward. Accordingly, Kim foresees trading opportunities arising in the consumer discretionary and financial sectors.
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