[Good Morning Market] Korean Stocks Expected to Remain Flat Amid Theme Stock Volatility Ahead of Extended Holiday

Volatility in Political Theme Stocks Expected to Continue
Securities Industry Expresses Growing Optimism for May

On May 2, the domestic stock market is expected to remain flat as caution sets in ahead of the upcoming extended holiday.

Previously, on May 1 (local time), the New York stock market closed higher across the board, buoyed by the surprise earnings results of big tech companies such as Microsoft (MS) and Meta Platforms, the parent company of Facebook. The Dow Jones Industrial Average, which is centered on blue-chip stocks, rose by 83.6 points (0.21%) to close at 40,752.96. The S&P 500, focused on large-cap stocks, increased by 35.08 points (0.63%) to 5,604.14, and the tech-heavy Nasdaq climbed by 264.4 points (1.52%) to finish at 17,710.74.

Reuters Yonhap News

The research division of iM Securities stated, "The fact that the US stock market closed higher across the board due to strong earnings from MS and Meta, and that the Philadelphia Semiconductor Index (+0.42%) also ended slightly higher after major tech companies reported their results, could have a positive effect on the domestic stock market." However, they also predicted, "Caution is expected to flow into the domestic market today ahead of the May extended holiday." Given that China is closed for Labor Day and both Korea and Japan will be closed for two consecutive days next week, the analysis is that caution will permeate Asian markets overall, resulting in a flat trend.

There were also opinions forecasting high volatility at the start of trading. Han Ji-Young, a researcher at Kiwoom Securities, noted, "Since after-hours declines have been observed in Apple and Amazon shares, the domestic market may start the day with high volatility. In particular, as the market is detecting a presidential election landscape that is favorable for short-term trading, related political theme stocks are likely to experience significant fluctuations."

In the securities industry, optimism is emerging regarding a recovery in global stock markets. Moon Nam-Joong, a researcher at Daishin Securities, commented, "May marks a turning point with the return of Trump's tariff policies, and the S&P 500 is likely to start heading toward the 6,000 level." He added, "The increasing expectations for each country's monetary and fiscal policies?including the introduction of economic stimulus (China), additional interest rate cuts (Europe), coordination of timing for rate hikes (Japan), and supplementary budgets and fiscal policies (Korea)?will likely bring major stock markets back to the levels seen in February, before tariff threats began to increase volatility."

Whether the trend of foreign investors selling Korean stocks, known as 'Sell Korea,' will ease is also a point to watch. Han Ji-Young said, "In May, with political uncertainty expected to be resolved due to the early presidential election and momentum from amendments to the Commercial Act, the direction of foreign capital is projected to shift toward inflows." She suggested that a gradual buying approach could be effective for sectors such as semiconductors, automobiles, and bio (which have frequently faced downward pressure due to tariff risks), domestic demand stocks (benefiting from the early election and economic stimulus), and low PBR stocks (supported by policies to resolve the Korea discount).