[Urgent Diagnosis] KOSPI Shakes Amid US Recession Concerns, Box Range Market Expected Over Further Decline

As concerns over an economic recession caused the US stock market to plummet, the KOSPI, which was attempting to recover the 2600 level, also fell back again. However, since the domestic stock market has already largely priced in recession fears, it is expected to move within a range rather than experience a significant further decline.

On the 11th, both the KOSPI and KOSDAQ started with declines exceeding 2%, but the losses later narrowed somewhat. The KOSPI dropped to the 2520 level, and the KOSDAQ fell to the 710 level.

This is interpreted as a direct reflection of the sharp drop in the New York stock market the previous day on the domestic market. Ji-young Han, a researcher at Kiwoom Securities, explained, "Looking at the recession issues that triggered the New York stock market crash, US President Donald Trump mentioned in an interview on the 9th that while he does not expect a recession, there could be a transitional period during the imposition of tariffs, implying that the possibility of a recession cannot be ruled out. This has led market participants to factor recession risks into stock prices."

However, there is an analysis that such a plunge is excessive. The researcher said, "It is necessary to recall that the Economic Surprise Index, which measures US economic momentum, was at -6.9 points as of the 10th, far from the -40 points level seen during the spread of recession narratives in August. This suggests that there are no signs of a recession prognosis yet." He added, "The US stock market crash caused by Trump-related recession fears is somewhat excessive. While it is true that risk management is necessary at this point, it is appropriate to respond with a neutral position (holding) rather than joining a sell-off, while monitoring major US economic indicator events and any changes in the Trump administration's tariff response level."

Kyung-min Lee, head of FICC Research at Daishin Securities, also said, "Fear of a US economic recession is stimulating overall volatility in global financial markets," but added, "However, the KOSPI is relatively holding up better than the US stock market, which can be seen as a relatively favorable trend for non-US markets as US bond yields fall and the dollar weakens due to recession fears."

With investment sentiment shrinking due to recession concerns, the stock market is expected to move within a range. Sang-young Seo, executive director at Mirae Asset Securities, said, "The domestic stock market has already priced in a significant portion of recession fears, so it is unlikely to fall sharply from here. In the worst case, it may temporarily break below the 2400 level due to supply and demand, but this will not be sustained." He added, "However, if recession issues persist, sentiment will inevitably continue to shrink, making it difficult for the market to rise or fall significantly. Trading will likely move within a range, with some activity centered on certain thematic stocks."

Jung-soo Kim, head of Research Division 1 at Mirae Asset Global Investments, also analyzed, "Concerns over recession fears stemming from Trump's actions have significantly contributed to the excessive decline in the US stock market. In the case of the domestic market, negative impacts from Trump's tariffs and other policies have been largely priced in since the second half of last year." He continued, "Therefore, although investment sentiment is negative due to weakening US economic momentum causing declines in market interest rates and indices, the negative impact will be limited thanks to benefits from China's economic stimulus measures, the domestic market's low valuation, and sectors with improving earnings such as shipbuilding and defense, which differ from the US Magnificent Seven (M7) sectors."

There is also a forecast that the correction will not be prolonged. Deputy General Manager Kyung-min Lee said, "Volatility may continue until the release of the US February Consumer Price Index (CPI) scheduled for the 12th," adding, "Even if there are short-term fluctuations, it will be more of a rebound attempt rather than a trend decline. Even if the US stock market wavers, the KOSPI may continue to show a trend of higher highs."