[Market ING] Can KOSPI Recover the 2600 Level Within This Month?

Expected KOSPI Band Between 2550 and 2680 Points

Attention is focused on whether the KOSPI, which failed to settle above the 2600 level throughout October, can recover the 2600 mark this week (October 28?November 1). Amid ongoing uncertainty surrounding the U.S. presidential election that affected the market last week, investors are expected to pay close attention to corporate earnings announcements.

[Image source=Yonhap News]

Last week, the KOSPI fell by 0.41%, and the KOSDAQ dropped by 3.43%. The KOSPI once again fell below the 2600 level, while the KOSDAQ slid down to the 720 range. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., diagnosed, "Due to risk-off sentiment, foreigners net sold both spot and futures, with Samsung Electronics leading the index decline. Healthcare stocks, which had supported the market, weakened amid rising market interest rates, and despite Tesla’s strong earnings, secondary battery stocks expanded their losses, resulting in the KOSDAQ’s relative underperformance."

Shin Seung-jin, a researcher at Samsung Securities, said, "I believe there are two main reasons for the recent relative weakness in our market: downward revisions in earnings forecasts for large-cap stocks by market capitalization and heightened risk-aversion ahead of the U.S. presidential election." He analyzed, "In the 10 key battleground states that decide the presidential election outcome, the possibility of Donald Trump’s lead is increasing, causing the dollar and interest rates to rise. This is due to concerns that Trump’s administration could expand fiscal deficits through tax cuts, increase U.S. inflation via higher tariffs on China, and potentially halt the upcoming interest rate cut cycle."

There is an analysis that the stock market’s poor performance in October is due to the earnings season. According to Daishin Securities, the KOSPI’s weakness in October has been recurring, with the average October return since 2000 at -1.14%, the lowest of the year. Lee Kyung-min, a researcher at Daishin Securities, explained, "The KOSPI has been stagnant throughout October, repeatedly failing to recover the 2600 level. The KOSPI’s weakness in October and its particularly poor performance compared to global markets is due to the earnings season. The KOSPI’s earnings season has seasonality: Q1 earnings surprises, Q2 earnings exceeding expectations, Q3 earnings falling short, and Q4 earnings shocks repeat. As a result, during the Q3 earnings season in October, concerns and disappointments about earnings begin to surface, leading to downward revisions not only for Q3 earnings forecasts but also for Q4 and next year’s earnings outlooks." He added that this year is showing a similar trend. The researcher further noted, "Uncertainty over Q3 earnings, which started in semiconductors, has spread across the market and sectors since October, weighing down the KOSPI."

This week, attention should be paid to earnings announcements from major U.S. big tech companies and key U.S. economic indicators. Kim Young-hwan, a researcher at NH Investment & Securities, said, "This week features major events such as key U.S. economic indicators and third-quarter earnings announcements from major companies. With the U.S. presidential election two weeks away, policy trades are expected to continue. The domestic stock market is expected to recover as U.S. Treasury yields stabilize, and investors should focus on companies that can benefit from strong big tech earnings." NH Investment & Securities projected the KOSPI’s expected range this week to be between 2550 and 2680.

Key schedules this week include the Eurozone’s preliminary Q3 GDP on the 30th, U.S. October ADP employment data, and U.S. Q3 GDP. On the 31st, South Korea’s September industrial activity trends, China’s October National Bureau of Statistics Purchasing Managers’ Index (PMI), and U.S. September Personal Consumption Expenditures (PCE) price index will be released. On November 1, South Korea’s October export-import trends, China’s October Caixin Manufacturing PMI, U.S. October employment report, and U.S. October Institute for Supply Management (ISM) manufacturing data are scheduled for release.

Earnings announcements from major U.S. and domestic companies will also continue. On the 28th, Ford will report; on the 29th, Alphabet, Visa, AMD, McDonald’s, and Pfizer; on the 30th, Microsoft (MS), Meta, Eli Lilly, and Caterpillar; on the 31st, Apple, Amazon, and Mastercard; and on November 1, ExxonMobil and Chevron will disclose their earnings. Domestic companies scheduled to report include LG Energy Solution and LG Chem on the 28th; POSCO Holdings, Samsung SDI, and POSCO Future M on the 30th; Samsung Electronics, NAVER, and Samsung Securities on the 31st; and Hanwha Aerospace and EcoPro BM on November 1.