[Market ING] KOSPI After Big Event, Will It Regain Stability Amid Uncertainty Resolution?

Weekly KOSPI Expected Band 2500~2620 Range

After digesting major events such as the U.S. presidential election and the November Federal Open Market Committee (FOMC) meeting last week, attention is focused on whether the KOSPI can regain stability and break out of its range-bound movement this week (November 11?15). While there are forecasts of a strong rebound, the market has remained sluggish, failing to reclaim the 2600 level so far this month, making optimism difficult.

Yonhap News

Last week, the KOSPI rose by 0.74%, and the KOSDAQ increased by 1.97%. On the 4th, both indices surged significantly following the Democratic Party's agreement to abolish the financial investment income tax (금투세), but they gave up some of the gains while digesting the U.S. presidential election. Lee Kyung-min, a researcher at Daishin Securities, diagnosed, "Unlike other Asian markets that showed an upward trend reflecting concerns such as the U.S.-China trade conflict and the potential repeal of the Inflation Reduction Act (IRA) as the U.S. presidential election, which had increased market volatility throughout the second half of the year, ended and the reality of a second Trump administration emerged, the election results acted as a negative factor for the KOSPI."

Considering the resolution of uncertainty following the election, stabilization of investor sentiment, and the undervaluation appeal of the KOSPI, there are expectations for a strong rebound. Researcher Lee said, "The KOSPI has underperformed global markets since August and still remains at about 8.7 times in terms of the 12-month forward price-to-earnings ratio (PER). We expect a strong reversal. Subsequently, until the end of the year, with the stabilization of investor sentiment, the undervaluation appeal of the KOSPI, November's seasonal demand factors (foreigners buying futures, program buying), and improvements in foreign demand based on bond yields and dollar downward stabilization, a resilient rebound is anticipated."

Following the U.S. presidential election, the "Trump trade" has strongly emerged, so it seems necessary to respond to sectors and stocks considering this for the time being. Kim Young-hwan, a researcher at NH Investment & Securities, said, "With the Republican Party's landslide victory in the election, the U.S. under Trump 2.0 will pursue a strong America-first policy. This will be a burden for major Korean export companies, led by semiconductors. During the period reflecting the policy risks of the new U.S. administration, it is necessary to keep in mind the decoupling between the Korean and U.S. stock markets and focus on opportunity factors at the individual industry and company level. Attention should be paid to Trump policy beneficiary stocks and Chinese economic stimulus beneficiary stocks." NH Investment & Securities projected the KOSPI range for this week to be between 2500 and 2620.

Key schedules for this week include the release of the U.S. October Consumer Price Index (CPI) on the 13th, Eurozone third-quarter Gross Domestic Product (GDP), Eurozone September industrial production, and U.S. October Producer Price Index (PPI) on the 14th. On the 15th, data on China's October housing prices, October industrial production, retail sales, fixed asset investment, and U.S. October retail sales and industrial production will be announced. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., said, "Next week, China’s real economy indicators are scheduled to be released, and it is necessary to check these indicators to confirm the effects of China’s stimulus measures and the strength of additional stimulus. Also, it is important to observe whether the November 11 Singles’ Day (Gwanggunje) can serve as a signal for domestic demand recovery."

Researcher Lee Kyung-min predicted, "If China’s stimulus policies lead to a real economic recovery, expectations may flow into sectors such as Chinese consumer goods amid recent hopes for improved relations with China." He added, "In the U.S., indicators such as CPI and retail sales are scheduled to be released, and with improved liquidity conditions, we will be able to confirm the solid growth trend of the U.S. economy by checking these real economy indicators."