[Market ING] KOSPI Attempts to Stabilize at 2,700... Focus on Presidential Election

KOSPI Expected to Stabilize Above 2,700 Points
Market Focuses on Presidential Election Results and Tariff Policy Uncertainty

Last week, the KOSPI index showed strong performance, recovering the 2,700-point level for the first time in nine months. As a result, attention is focused on whether this upward trend will continue this week (June 2 to June 6). The KOSPI is expected to attempt to stabilize above the 2,700-point mark, with the market closely watching the results of the presidential election.

Yonhap News

Last week, the KOSPI rose by 4.07% and the KOSDAQ by 2.57%, respectively. After a strong rally, the KOSPI gave up the 2,700-point level in just one day on May 30, closing lower. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., explained, "The KOSPI quickly broke through the 2,700 mark and set a new annual high as the positive news of U.S. President Donald Trump’s decision to delay the 50% tariff on the European Union was reflected, and the U.S. Court of International Trade put a brake on reciprocal tariffs based on the International Emergency Economic Powers Act." He added, "However, uncertainty remained as the U.S. Federal Appeals Court accepted Trump’s request to suspend the ruling, and Treasury Secretary Scott Besant stated that trade negotiations with China are at a standstill. In addition, as foreign investors turned to net selling for two consecutive trading days after a short-term rally last week and profit-taking sales emerged, the KOSPI lost the 2,700-point level."

Although tariff-related uncertainties persist, their impact is expected to weaken. Lee Kyung-min, a researcher at Daishin Securities, stated, "On May 28, the U.S. Court of International Trade ruled that the imposition of reciprocal tariffs under a national emergency exceeded the authority of the executive branch. However, as the Trump administration’s request for a stay of execution (allowing reciprocal tariffs to continue) was granted along with the appeal, Trump’s tariff policy remains in effect." He continued, "Nevertheless, the intensity of Trump’s tariff policy is expected to weaken."

There are also opinions that attention should shift from tariffs to interest rate cuts. Lee added, "It remains to be seen whether expectations for interest rate cuts can revive, leaving behind the controversy over tariffs. The employment indicators to be released on June 6 are highly likely to stagnate or slow down. The unemployment rate is expected to remain unchanged from the previous month at 4.2%, but the number of nonfarm payrolls is projected to decrease to 130,000 from 177,000 in the previous month, confirming sluggish corporate hiring." He continued, "During the ongoing legal disputes over tariff policies, corporate uncertainty and passive hiring are inevitable. On the other hand, as the intensity of tariff policy weakens and economic slowdown is expected to keep inflation in check, the Federal Reserve’s hawkish (monetary tightening) stance could become more flexible depending on the employment indicators."

Na Jung-hwan, a researcher at NH Investment & Securities, also commented, "In the second half of the year, it is more important to focus on sectors that could benefit from interest rate cuts, that is, lower discount rates, rather than responding to tariff uncertainties."

This week, the market is expected to pay close attention to the presidential election results. Na noted, "Recently, expectations for stock market stimulus measures by presidential candidates have had a positive effect on stock prices, as seen in the strong performance of holding companies and stocks with low price-to-book ratios (PBR) in the main board market. However, there are concerns that after the next president is confirmed following the June 3 election, profit-taking may occur in sectors that have risen due to new government policies. While the possibility of profit-taking exists, if policies such as the amendment of the Commercial Act, expansion of dividend payout ratios, and share buybacks are implemented to resolve the Korea Discount (undervaluation of the Korean stock market), foreign capital is likely to flow in after confirming the implementation of such policies." NH Investment & Securities suggested a KOSPI forecast band of 2,590 to 2,800 for this week.

This week’s major economic events include the release of the U.S. May ISM Manufacturing Index on June 2, the U.S. April Factory Orders and China’s May Caixin Manufacturing PMI on June 3, the U.S. May ISM Services Index and the Federal Reserve’s Beige Book on June 4, and the U.S. May Employment Report on June 6.

Lee noted, "The U.S. ISM is scheduled to release the Manufacturing Index on June 2 and the Services Index on June 4. The Manufacturing Index is expected to rise slightly to 49.0 from 48.7 in the previous month, and the Services Index is also expected to increase to 52.0 from 51.6. As the market digests the tariff shock and regains psychological stability, if concerns over tariff policies ease, there is a greater possibility of corporate sentiment recovering."