[Market ING] Kospi Attempts to Recover 2600, Focus on G2 Economic Indicators

This Week's KOSPI Expected Band: 2540~2670 Range

Last week, the KOSPI fell below the 2600 mark again, and attention is focused on whether it can recover the 2600 level and continue its upward trend this week (October 14-18). In particular, this week is expected to be influenced by economic indicators from the G2 (the United States and China).

[Image source=Yonhap News]

Last week, the KOSPI rose by 1.06% and the KOSDAQ by 0.26%. Although the KOSPI recovered the 2600 level early in the week, it fell back below 2600 due to weakness following Samsung Electronics' preliminary Q3 earnings announcement. Shin Seung-jin, a researcher at Samsung Securities, analyzed, "Since Black Monday on August 5, the KOSPI has been trapped in a box range of 2500-2700, and the KOSDAQ has also continued a frustrating trend within the 700-800 range. The KOSPI is affected by Samsung Electronics’ weak Q3 earnings and concerns over a semiconductor peak-out (decline after peak), while the KOSDAQ is impacted by a decrease in trading volume due to ongoing tax-related uncertainties."

For the time being, a stock-specific approach seems necessary. Researcher Shin said, "During periods when large-cap stocks in the market are resting, individual stock plays can become stronger. Now, it is necessary to focus on stocks with better momentum rather than the index." Kim Young-hwan, a researcher at NH Investment & Securities, also said, "It is time to focus on opportunity factors at the individual industry and company level rather than macroeconomic variables," adding, "Attention should be paid to U.S.-driven artificial intelligence (AI) momentum and China’s economic stimulus measures." NH Investment & Securities projected the KOSPI range for this week to be between 2540 and 2670.

This week’s market is expected to focus on G2 economic indicators. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., said, "This week requires confirmation of G2 economic indicators. After the U.S. employment report, expectations for a rate freeze in November have increased, easing economic concerns for now. Since China is also actively driving economic stimulus, the release of Q3 gross domestic product (GDP) and real economy indicators will likely have a greater impact on expectations than on the actual content."

Particularly, interest in Chinese indicators is expected to be high. Since the Chinese government has launched a large-scale economic stimulus, the market will try to confirm whether the real economy is rebounding through economic indicators. Lee Kyung-min, a researcher at Daishin Securities, said, "On the 13th, the Consumer Price Index (CPI) will be released, followed by trade data on the 14th, and on the 18th, Q3 GDP, retail sales, industrial production, and housing prices will be announced, providing a comprehensive check on China’s current economic situation." He explained, "Although the strong and continuous economic stimulus package has raised policy expectations, investors remain skeptical about a rebound in China’s real economy. The policies announced at the end of September are unlikely to be immediately reflected in the indicators, but they will help gauge the realism of the Chinese government’s determination to achieve an annual GDP growth rate of 5%." He added, "If the strong economic stimulus commitment of the Chinese government is confirmed, it will not only raise expectations for China’s economic recovery but also enable export and economic recovery expectations and global liquidity inflows into the Korean stock market, which is perceived as a proxy for the Chinese stock market."

This is an environment where the economic and liquidity conditions of the U.S. and China are simultaneously easing, highlighting the undervaluation appeal of the KOSPI. The researcher said, "As of the 10th, the forward price-to-earnings ratio (PER) of the KOSPI is only 8.63 times, and the forward price-to-book ratio (PBR) is just 0.85 times. During the process of confirming G2 economic indicators, a strategy to increase weighting by utilizing volatility amid short-term uncertainty inflows is effective. Attention should be paid to sectors with excessive declines relative to earnings such as semiconductors, automobiles, and machinery, as well as growth sectors like secondary batteries and internet."

Key schedules for this week include the release of China’s September CPI and Producer Price Index (PPI) on the 13th, and China’s September trade data on the 14th. On the 17th, U.S. September retail sales and industrial production will be announced, and on the 18th, China’s Q3 GDP, September industrial production, retail sales, and fixed asset investment data will be released.

In the U.S., the Q3 earnings season has begun, with UnitedHealth Group, Johnson & Johnson, Bank of America (BoA), Goldman Sachs, Citigroup, and Rio Tinto releasing earnings on the 15th; ASML, Morgan Stanley, and Lam Research on the 16th; TSMC and Netflix on the 17th; and P&G and American Express on the 18th.