[Market ING] Trump Returns, Caution Advised Amid Stock Market Volatility

KOSPI Weekly Expected Range: 2440 to 2570

Despite the KOSPI maintaining a decent trend since the beginning of the year, volatility is expected to increase this week (January 20-24). This is due to the inauguration of the second Trump administration, which may bring heightened uncertainty from a flood of executive orders immediately following the inauguration.

Yonhap News

Last week, the KOSPI rose by 0.31% and the KOSDAQ by 0.95%. Cautious sentiment spread ahead of Trump's inauguration. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., analyzed, "The surprise in the U.S. December employment report weighed down Asian stock markets, including Korea, and as Trump's inauguration approached, the U.S. long-term Treasury yield neared 4.8%, dampening risk asset appetite. Nevertheless, with the U.S. December Producer Price Index (PPI) and Consumer Price Index (CPI) showing favorable results, the market attempted a rebound."

Lee Kyung-min, a researcher at Daishin Securities, also noted, "Last week, inflation anxiety eased as inflation indicators fell short of expectations. Following the employment shock the previous week, concerns over monetary policy subsided, and the 10-year U.S. Treasury yield, which had threatened the 4.8% level, dropped by 14 basis points (1bp = 0.01 percentage point) in one day to 4.66%, signaling a slowdown in inflationary pressure and easing doubts about the rate hike cycle. The biggest hurdle in January has been overcome."

This week, the market is expected to focus on President Donald Trump's inauguration and the executive orders that will follow. Na Jung-hwan, a researcher at NH Investment & Securities, said, "With Trump's inauguration on the 20th (local time), market participants will pay close attention to whether Trump signs executive orders. Particularly important is whether Trump will actually impose tariffs on Mexico, Canada, and China. Early in his term, Trump may adopt a strategy to enhance his external negotiating power, strongly signaling the possibility of imposing tariffs. This is a factor that could increase stock price volatility in the short term." NH Investment & Securities projected the KOSPI range for this week to be between 2440 and 2570.

Although concerns about the launch of the second Trump administration are significant, there are also forecasts that the stock market could perform better than expected. Shin Seung-jin, head of investment information at Samsung Securities, said, "There are major concerns that domestic and international uncertainties and Trump's inauguration will burden the market with uncertainties about future trade policies. However, I believe the Korean stock market could show better-than-expected performance this year. The negative factors the market worries about are already fully reflected in current prices, and there is a possibility that policies after the start of Trump's second term may not be as bad as expected. Since stock prices have fallen significantly due to trade policy concerns, if the situation is not as bad as feared, stock prices could recover faster than expected."

With the Lunar New Year holiday approaching, a cautious stance is expected to become more prominent. Kim Ji-won, a researcher at KB Securities, forecasted, "As the market enters a long holiday starting on the 27th, cautious sentiment will become more evident from the latter part of the week. It will be necessary to respond calmly while reviewing earnings and policy variables."

Key schedules for this week include Korea's January (1-20) export and import data on the 21st, Korea's fourth-quarter GDP for last year on the 23rd, and the U.S. December Conference Board Leading Economic Index announcement. On the 24th, the Bank of Japan (BOJ) Monetary Policy Meeting will be held.

Researcher Lee Kyung-min said, "The BOJ Monetary Policy Meeting is scheduled for the 24th, and recently the BOJ Governor has repeatedly hinted at the possibility of interest rate hikes, raising market tension. Depending on the situation of the Japanese Consumer Price Index (CPI) released ahead of the meeting and the BOJ's stance, short-term volatility may be introduced."

Earnings announcements from major U.S. and domestic companies will continue. On the 21st, Netflix and Charles Schwab will report; on the 22nd, Johnson & Johnson; on the 23rd, Texas Instruments; and on the 24th, American Express and Verizon will release their results. Domestic companies will report their fourth-quarter earnings as follows: HD Hyundai Electric on the 20th; Kia, LG Innotek, Samsung C&T, and Samsung Biologics on the 22nd; SK Hynix and Hyundai Motor on the 23rd; and LG Energy Solution on the 24th.