[Market ING] Will KOSPI Find Stability After Escaping Sudden Plunge Shock?

Weekly KOSPI Expected to Range Between 2350 and 2550

Last week, the KOSPI experienced a rollercoaster trend. The KOSPI, which had plunged due to concerns over a trade war triggered by China's retaliatory tariffs, even fell below the 2300 level but then sharply rose following U.S. President Donald Trump's 90-day suspension of reciprocal tariffs, quickly recovering to the 2400 level. This week (14th to 18th), attention is focused on whether the stock market can regain stability.

Yonhap News

Last week, the KOSPI fell by 1.33%, while the KOSDAQ rose by 1.19%. Lee Kyung-min, a researcher at Daishin Securities, explained, "The market, which had preemptively factored in the disruption of global supply chains, deterioration in trade and demand, and even the possibility of a recession caused by the imposition of reciprocal tariffs that shocked the market, showed strong rebound as the fear sentiment eased following the 90-day suspension of reciprocal tariffs."

However, there are forecasts that aftershocks may continue for some time. Shin Seung-jin, a researcher at Samsung Securities, said, "Fortunately, the market seems to be stabilizing, but aftershocks are expected to continue. The U.S.-China tariff dispute is ongoing, and although the intensity has decreased, a 10% general tariff has begun. Uncertainty regarding product-specific tariffs on South Korea’s key export items such as semiconductors and biopharmaceuticals still remains."

He added, "Over the next 90 days, major trading countries will have to negotiate with the U.S. to reduce the announced reciprocal tariffs. For the time being, volatility in both directions is inevitable depending on major statements and outcomes related to tariff negotiations by President Trump, Chinese President Xi Jinping, and other countries."

However, the increase in volatility is seen as an opportunity to increase portfolio weight. Lee said, "As the tariff uncertainty passes its peak, the increase in volatility is judged to be an opportunity to increase weight. If tariff negotiations with countries other than China remain at the current level, the global stock price uptrend is expected to resume."

Differences are expected in the rebound across sectors. Shin said, "The timing and extent of sectoral rebounds will vary somewhat. Sectors affected by tariffs such as semiconductors and automobiles are unlikely to see meaningful rebounds until uncertainties are resolved. However, this could be a period of interest for investors with a long-term investment horizon."

During the ongoing volatility caused by tariffs, shipbuilding and defense stocks, which have shown strength so far, are expected to play a leading role. Shin analyzed, "Currently, sectors clearly benefiting from U.S. policies are the market leaders. Since the resumption of short selling, sectors lacking earnings and policy momentum such as secondary batteries have shown weakness. However, stocks in shipbuilding and defense sectors, which have abundant earnings and policy momentum, are showing steady performance."

With the resolution of domestic political uncertainties, attention to domestic consumption stocks also seems necessary. Na Jung-hwan, a researcher at NH Investment & Securities, said, "Although the U.S.-China tariff war continues, the recent suspension of reciprocal tariffs confirms that Trump does not want extreme events such as a hard landing triggered by asset markets. While aftershocks may exist, it is time to test the downside of the index. With the presidential election date set and the election race intensifying, interest in domestic consumption stocks such as food and beverage and distribution, which benefit from economic stimulus momentum, will continue." NH Investment & Securities projected the KOSPI range for this week to be between 2350 and 2550.

Key schedules for this week include the release of U.S. March retail sales and industrial production data, as well as China’s first-quarter GDP, March retail sales, March industrial production, and March fixed asset investment on the 16th. On the 17th, the Bank of Korea’s Monetary Policy Committee meeting and the European Central Bank (ECB) monetary policy meeting will be held. The 18th is Good Friday, and the Hong Kong, European, and U.S. stock markets will be closed.

Lee Kyung-min emphasized, "Attention should be paid to the U.S. March retail sales data released on the 16th. A 1.4% increase month-on-month is expected due to front-loaded demand ahead of tariff measures. Although this is before the 10% basic tariff, most trading partners have confirmed tariff suspensions for April reciprocal tariffs, so solid retail sales performance could alleviate concerns about the U.S. economy." He added, "On the 16th, important real economy indicators such as China’s first-quarter GDP, retail sales, and industrial production will be announced. It is crucial to see whether China’s strong economic stimulus intentions and policies are confirmed by a recovery in the real economy. If consumption growth is confirmed, expectations for improved earnings of domestic export companies due to a positive effect from China will increase, and if weak, expectations for strengthened stimulus policies will be possible."