[Market ING] Continued Range-Bound Movement Amid Trump Policy Risks

Expected KOSPI Band, 2430~2550 Range
Rising Concerns Over Economic Slowdown Amid BOK Rate Cut
Trump Risk Still Weighs on Domestic Stock Market
Possibility of Slight Rebound as Concerns Ease

The domestic stock market this week (2nd to 6th) is expected to continue its range-bound movement amid ongoing U.S. policy risks. However, attention is focused on whether the Bank of Korea's surprise rate cut and easing of geopolitical risks in the Middle East will act as upward factors. Securities firms have projected the KOSPI range for this week to be between 2430 and 2550.

Yonhap News

According to the Korea Exchange on the 1st, last week (November 25?29) the KOSPI closed at 2455.91, down 24.72 points (-1.00%) from the previous week. On November 29, despite the Bank of Korea’s rate cut, concerns over domestic economic slowdown and the Trump administration’s announcement of additional tariffs overlapped, causing the KOSPI to dip into the 2450 range. Foreign investors were heavy sellers. In the KOSPI market, foreigners net sold 1.9502 trillion KRW, while individuals and institutions net bought 981.5 billion KRW and 467.1 billion KRW, respectively. During the same period, the KOSDAQ closed at 680.67, down 2.48 points (-0.36%).

Kang Jin-hyuk, a researcher at Shinhan Investment Corp., explained, "The Monetary Policy Committee expressed concerns about downside risks to the economy, and the October industrial activity report showed simultaneous weakness in production, consumption, and investment, which expanded these concerns. Additionally, the November core Consumer Price Index (CPI) in Japan exceeded market expectations, leading to yen appreciation, which contributed to the KOSPI falling below 2500."

Although the Bank of Korea’s two consecutive rate cuts are positive for investor sentiment, the fact that the rate cuts were made abruptly due to concerns over domestic economic slowdown has resulted in dampening investor confidence.

Hwang Jun-ho, a researcher at Sangsangin Securities, said, "Growth stock themes such as bio, secondary batteries, and gaming are expected to benefit from the rate cuts. However, considering the expected further contraction in export growth, the Bank of Korea is likely to lower its growth forecast for next year. Also, the shift in investment sentiment in the AI theme from hardware like semiconductors to software could limit additional upward momentum in the semiconductor sector."

Policy risks from the Trump administration’s second term are also expected to continue to weigh on the domestic stock market. Kim Young-hwan, a researcher at NH Investment & Securities, said, "The Trump second-term cabinet is composed of loyal figures, but the cabinet appointments made unilaterally without Senate consultation do not necessarily indicate strong Republican support for extreme pledges. Policies that can be implemented by executive order, such as increasing crude oil production and cutting government budgets and personnel, will proceed quickly, but policies requiring new legislation, such as amendments to the Inflation Reduction Act (IRA) or imposing high tariffs, may take time."

NH Investment & Securities projected the KOSPI range for this week to be 2430 to 2550. They cited the Bank of Korea’s rate cut and easing of Middle East geopolitical risks as upward factors, and the Trump administration’s foreign policy risks as downward factors.

However, there are also opinions that concerns over Trump policy risks are easing. Lee Kyung-min, a researcher at Daishin Securities, said, "The 10-year U.S. Treasury yield, which had reached 4.5%, has fallen to the 4.26% range, and the dollar index, which threatened the 108 level, has stabilized in the low 106 range. We are entering a phase where sensitivity to excessive Trump risks is normalizing after peaking."

There are also forecasts that the KOSPI will rebound slightly, arguing that the concerns currently reflected in the KOSPI are excessive. Researcher Lee Kyung-min said, "As uncertainty factors normalize, attempts at a rebound are expected to continue. When major sectors such as semiconductors, which have experienced excessive declines, rebound, the KOSPI’s rebound momentum could strengthen."

Mirae Asset Securities expects positive stock price trends in the shipbuilding, entertainment & media, and banking sectors. Yoo Myung-gan, a researcher at Mirae Asset Securities, said, "In response to Trump risks, defensive sectors such as software, telecommunications, healthcare, and utilities are likely to be favored over cyclical stocks in the short term. We maintain a positive view on shipbuilding and entertainment & media sectors, which are expected to see earnings turnarounds next year, and the banking sector, which is expected to see valuation increases due to shareholder returns."