[Good Morning Market] Domestic Policy Momentum Continues... KOSPI Expected to Open Higher

On June 10, the KOSPI is expected to open higher as the policy momentum of the new government continues.

The previous day, at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,761.76, down 1.11 points (0.00%) from the previous session. The S&P 500 rose by 5.52 points (0.09%) to 6,005.88, while the Nasdaq Composite gained 61.28 points (0.31%) to close at 19,591.24.

The previous day, the New York stock market ended mixed. Although there were upward factors such as a slowdown in the New York Federal Reserve's one-year inflation expectations and optimism about the relationship between US President Donald Trump and Tesla CEO Elon Musk, which led to a rally in Tesla shares, the delay in the announcement of the results of the second round of US-China negotiations and caution ahead of the May Consumer Price Index (CPI) release limited further gains.

The second round of high-level US-China trade talks, currently underway in London, is being evaluated positively. US officials are optimistic about the atmosphere of the negotiations, and the key issues emerging in this round are the easing of China's rare earth export restrictions and the relaxation of US semiconductor export controls to China.

These expectations were also reflected in the New York stock market the previous day. The possibility of a US-China deal was cited as the reason for the strength in the Philadelphia Semiconductor Index (up 2.0%) and Micron (up 2.2%). However, since this round of negotiations does not mean an immediate end to the tariff war between the two countries, there remains the possibility that uncertainty regarding follow-up negotiations will continue to affect the market going forward.

The previous day, the Korean stock market closed higher, supported by large-scale net buying by foreign investors (about 970 billion won). The KOSPI rose by 1.6%, and the KOSDAQ increased by 1.1%, indicating a recovery in investor sentiment. This was due to a combination of strong US employment data and expectations for new government policies in Korea.

Today, the Korean stock market is expected to open higher, supported by stable US inflation expectations, strength in the global semiconductor sector, and domestic policy momentum. However, caution regarding US-China negotiations and profit-taking after the KOSPI's sharp 5.8% rally over the past three trading days may limit intraday upward momentum.

Currently, the KOSPI has surpassed the 2,850 level, continuing its rally since the presidential election on June 3. From a technical perspective, a "golden cross" has formed, with the short-term moving average crossing above the medium- and long-term averages, a phenomenon seen for the first time since last year's bull market. As a result, technical expectations are also gradually rising.

From a supply and demand perspective, foreign buying is also pronounced. So far this month, foreigners have recorded net purchases of about 3.1 trillion won in the KOSPI, leading the market higher. This is interpreted as a reaction not only to expectations of foreign exchange gains due to a stronger won, but also to the "supply vacuum" created by net selling of about 38 trillion won over the past nine months (from August last year to April this year).

Currently, foreign ownership of KOSPI stocks stands at 31.4%, which is still below the average of 32.8% during the last foreign buying phase (from November 2023 to July last year). Notably, the semiconductor sector has ranked first in foreign net buying in June (about 1.6 trillion won), suggesting that there is still significant foreign buying potential in this sector.

Han Ji-young, a researcher at Kiwoom Securities, said, "Expectations for the Korea Discount resolution policy being pursued by the Lee Jaemyung administration also appear to be having some impact on foreign buying. The precedent of foreigners recording net purchases of 11.3 trillion won during the value-up policy announcement in January?February last year supports this."

However, she added, "As the KOSPI has surged sharply in a short period, technical fatigue is accumulating, and external factors such as the upcoming US May CPI release and the results of the US-China negotiations this week could prompt foreigners to adjust their pace of buying. Considering the possibility of foreign investors re-evaluating Korean stocks and the potential for FOMO (fear of missing out) sentiment, the likelihood that a correction will lead to a trend reversal appears limited."