[Good Morning Market] 'Did It Rise Too Fast?'... "Korea May See Weaker Foreign Buying"

Closely Monitoring Middle East Escalation and FOMC Results

As global stock markets remain cautious due to the possibility of an escalation in the Middle East, the domestic stock market is expected to take a wait-and-see approach, watching closely to see if the momentum from new government policies will continue.

Yonhap News

On June 13 (local time), major U.S. stock indexes in New York closed sharply lower as the geopolitical situation in the Middle East deteriorated following Israel's airstrikes on Iran. The Dow Jones Industrial Average fell 769.83 points (-1.79%) to close at 42,197.79. The S&P 500 Index dropped 68.29 points (-1.13%) to 5,976.97, while the Nasdaq Index lost 255.66 points (-1.30%) to end at 19,406.83. The Russell 2000 Index, which focuses on small and mid-cap stocks, declined by 1.85%, and the Philadelphia Semiconductor Index plunged by 2.61%.

Israel's successive airstrikes and Iran's retaliatory missile launches heightened geopolitical risks and dampened investor sentiment. While the market initially narrowed its losses during the session, reflecting hopes that a full-scale war was unlikely, the prospect of a prolonged conflict led to a renewed widening of the declines.

Due to geopolitical instability, international oil prices surged, boosting energy stocks such as ExxonMobil (up 2.18%) and Diamondback Energy (up 3.74%). Defense stocks like Lockheed Martin (up 3.66%) and RTX (up 3.34%) also performed strongly. In contrast, airline stocks such as Delta Air Lines (down 3.76%) and United Airlines (down 4.43%) fell, affected by both the burden of higher oil prices and concerns over declining demand.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose 2.80 points from the previous session to 20.82, surpassing the 20 mark.

Meanwhile, the U.S. June Consumer Sentiment Index came in at 60.5, significantly exceeding both the forecast (53.5) and the previous month's figure (52.2). Both the expectations index and the current conditions index saw substantial improvements, and the one-year expected inflation rate dropped sharply to 5.1% from the previous month. This indicator temporarily helped reduce the early-session losses in the stock market.

The Korean stock market is expected to remain in a wait-and-see mode for the time being. Key variables include whether there will be a full-scale war between Israel and Iran, the direction of monetary policy after the June Federal Open Market Committee (FOMC) meeting, real economic indicators such as U.S. and Chinese retail sales and industrial production for May, and whether expectations for new government policies will persist.

Han Jiyeong and Lee Sunghoon, researchers at Kiwoom Securities, stated, "The key issue is whether the stock price momentum led by foreign inflows after the presidential election will continue." They added, "While the net buying trend by foreigners is unlikely to reverse easily, the price burden accumulated during the recent period of concentrated short-term net buying, noise stemming from the Middle East, and the wait-and-see sentiment ahead of the FOMC may temporarily weaken the intensity of foreign net purchases."

Kim Jiwon, a researcher at KB Securities, said, "It is also time to satisfy the desire for profit-taking following the recent sharp rise," and predicted, "A short-term adjustment to absorb selling pressure is inevitable."