[Good Morning Market] KOSPI Surpasses 2,800... Will the Honeymoon Rally Continue?

The KOSPI surpassed the 2,800 mark just two days after President Lee Jaemyung's inauguration, reaching its highest level in 11 months. On June 9, the domestic stock market is expected to continue its honeymoon rally on the back of policy expectations. However, the growing fatigue from the recent rally is likely to act as a burden.

Yonhap News

On June 6 (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,762.87, up 443.13 points (1.05%) from the previous session. The S&P 500 rose 61.06 points (1.03%) to 6,000.36, while the Nasdaq jumped 231.50 points (1.20%) to 19,529.95.

The stronger-than-expected U.S. nonfarm payroll data for May had an impact. The robust employment figures supported buying sentiment. The U.S. Department of Labor announced that nonfarm payrolls increased by 139,000 in May compared to the previous month, exceeding the market expectation of 130,000.

Additionally, the prospect of trade negotiations between the United States and China in London, United Kingdom, also heightened expectations. The negotiations will involve U.S. Treasury Secretary Scott Besant, Secretary of Commerce Howard Rutnick, and U.S. Trade Representative (USTR) Jamison Greer.

The domestic stock market is expected to extend its honeymoon rally today. Han Jiyoung, a researcher at Kiwoom Securities, said, "The reason for the focus on the Korean stock market's strong performance is the emergence of a honeymoon rally driven by policy expectations following the June 3 presidential election. Expectations for President Lee Jaemyung's pledge to resolve the Korea Discount (the undervaluation of the Korean stock market) are becoming the main driver of this honeymoon rally."

She added, "In the short term, there is room for further gains to the 2,990-3,000 level, which corresponds to a trailing price-to-book ratio (PBR) of 1.0. If President Lee Jaemyung's policies, such as amendments to the Commercial Act and mandatory retirement of treasury shares, lead to a substantial valuation rerating, expectations for KOSPI 5,000 will remain valid."

However, the accumulation of fatigue from the recent sharp rally is a concern. Han emphasized, "The burden of overheating due to the rapid short-term rise is something to watch out for. To sustain the rally, improvements in earnings outlook, tariffs, and other macroeconomic indicators are necessary."

By sector, expectations remain high for industries that benefited from increased fiscal spending. Heo Jaehwan, a researcher at Eugene Investment & Securities, said, "During periods of fiscal expansion, it is important to pay attention to domestic demand sectors. Over the past 10 years, the sectors that performed strongly in the domestic stock market during periods of increased fiscal spending have been consumer goods, telecommunications, healthcare, energy, and utilities."