[Market ING] Expectations for Trump Panic Easing... Will KOSPI Technically Rebound?

Focus on Nvidia Earnings Announcement
KOSPI Expected Range, 2350~2500 Level

This week (18th-22nd), the domestic stock market is expected to see a technical rebound as the Trump Trade (the phenomenon of money flowing into stocks benefiting from President-elect Trump) calms down. The upcoming earnings announcement of Nvidia is likely to serve as an opportunity to restore investor sentiment toward domestic semiconductor stocks.

On the 15th, dealers are working in the KB Kookmin Bank dealing room in Yeouido, Seoul, where the KOSPI index fell below the 2400 mark for the first time in three months since the 'Black Monday' in August. On the same day, the won-dollar exchange rate opened at 1,408 won, up 2.9 won from the previous day. Photo by Kang Jin-hyung

According to the Korea Exchange on the 17th, the KOSPI index closed at 2,416.86, plunging 144.29 points (5.63%) over the week (11th-15th). During the same period, the KOSDAQ index fell 57.96 points (7.8%) to close at 685.42. Both major indices experienced a sharp decline due to concerns over policy changes following President Trump's election.

In particular, the semiconductor sector was the most shaken by the Trump policy risk. This was due to concerns that the Trump administration would strengthen export regulations on semiconductors to China. Considering the high proportion of semiconductor exports to China by Korean semiconductor companies, Trump's China policy in his second term could pose a risk to the Korean semiconductor industry. Additionally, news that the Trump administration's transition team was reviewing the abolition of electric vehicle tax credits caused secondary battery stocks to fall, dragging down both major indices.

The won-dollar exchange rate rose by 12.40 won to 1,398.80 won, barely closing the week below the 1,400 won mark.

This week is expected to highlight the price merit of the KOSPI, with forecasts of a rebound. Lee Kyung-min, a researcher at Daishin Securities, said, "Currently, the KOSPI is in an extremely undervalued zone, so a rebound is possible simply by easing anxiety," adding, "As uncertainties about Trump’s policies, earnings, and supply-demand instability pass their peak, a technical rebound is expected."

However, the Trump policy risk is expected to continue until early next year. The securities industry views the easing of policy uncertainty as occurring after the inauguration ceremony in January. Kim Young-hwan, a researcher at NH Investment & Securities, said, "The stock market has experienced a large drop in a short period, and recently the Trump Trade has been slowing down in the U.S., so a technical rebound seems possible," but added, "However, the time when Trump’s policy uncertainty can actually decrease is thought to be after the inauguration on January 20th next year."

Attention should also be paid to events that could affect the semiconductor stock trend, which was the main factor behind last week’s KOSPI decline. Nvidia’s earnings announcement is scheduled for the 20th (local time). The consensus for Nvidia is revenue of $32.96 billion and earnings per share (EPS) of 70 cents. If Nvidia’s earnings meet market expectations, it could help alleviate concerns about the semiconductor industry.

Meanwhile, NH Investment & Securities forecast the KOSPI band for this week to be between 2,350 and 2,500.