[Good Morning Stock Market] KOSPI Expected to Pause... Stocks with Excessive Decline Rise After Martial Law

EPA Yonhap News

On the 13th, the KOSPI index is expected to show a breathing space pattern after three consecutive days of gains. However, the stock price recovery trend is likely to continue, especially among stocks that experienced excessive declines relative to earnings following the state of emergency.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 43,914.12, down 234.44 points (0.53%) from the previous session. The S&P 500 index fell 32.94 points (0.54%) to 6,051.25, and the Nasdaq Composite dropped 132.05 points (0.66%) to 19,902.84.

The decline in the New York stock market is analyzed to be due to inflation concerns following the rise in the Producer Price Index (PPI). The U.S. November PPI rose 0.4% month-over-month, exceeding expert expectations. Compared to the same month last year, it increased by 3%, raising fears that inflationary pressures will spread again.

Additionally, concerns arose that the economy could contract as Donald Trump, the President-elect of the United States, hinted at strengthening tariff policies next year. Trump has indicated a policy direction to impose a universal tariff of 10-20% on all imports.

In response, investors are focusing on interest rate volatility next year, with expectations that the U.S. Federal Reserve (Fed) will cut the benchmark interest rate by 0.25% at this month's meeting or significantly reduce the number of rate cuts next year.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.04%, and the MSCI Emerging Markets (EM) ETF declined 0.51%. The KOSPI index is expected to show a breathing space pattern following three consecutive days of recent gains.

Lee Seong-hoon, a researcher at Kiwoom Securities, stated, “Looking at the recent domestic stock market trend after the state of emergency, it is judged that a consensus on recognizing the bottom has been formed both in terms of valuation and supply-demand.” He added, “Especially due to the recent sharp decline, the inflow of low-price buying by pension funds will firmly support the downside of the domestic stock market for the time being.”

He continued, “Meanwhile, the opposition party submitted a second impeachment motion against the president to the National Assembly yesterday. If the impeachment motion is passed in the plenary session vote on the 14th, it is necessary to pay attention to the possibility that foreign investor supply-demand conditions for the domestic stock market may improve next week as a way to resolve uncertainties related to this unique domestic political event.”