[Good Morning Stock Market] Middle East Ceasefire Hopes: "Korean Stock Market Expected to Open Strong"

On June 17, the domestic stock market is expected to start strong, buoyed by a rebound in the US stock market driven by hopes for a ceasefire between Israel and Iran. However, some analysts point out that fatigue from the recent rapid rise could act as a burden.

Previously, on June 16 (local time), the New York stock market closed higher across the board amid expectations of easing tensions in the Middle East. The Dow Jones Industrial Average, which focuses on blue-chip stocks, rose by 317.3 points (0.75%) to 42,515.09. The S&P 500 Index, which tracks large-cap stocks, gained 56.14 points (0.94%) to close at 6,033.11. The Nasdaq Index, which is centered on technology stocks, jumped 294.39 points (1.52%) to finish at 19,701.21.

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Han Ji-young, a researcher at Kiwoom Securities, stated, "Ultimately, this Middle East tension is not expected to escalate into a major crisis on the scale of the 2022 Russia-Ukraine war." She added, "While the market will continue to monitor whether the situation spreads, the importance of existing issues such as the June Federal Open Market Committee (FOMC) meeting and tariff negotiations will become more pronounced in terms of their impact on the stock market."

As signs of easing tensions in the Middle East emerge, this is also expected to provide positive momentum for the domestic stock market. However, the fact that hopes for a ceasefire were already priced in during the previous day's sharp rally, as well as concerns about overheating in the short term, are cited as variables. Foreign investors, who had driven the KOSPI's rise after the presidential election, also turned net sellers (320 billion won) for the first time in nine trading days on the previous day.

Han explained, "As can be inferred from their shift to net selling yesterday, there is a possibility that short-term profit-taking will occur among previously leading sectors that surged to record highs in tandem, such as defense, shipbuilding, electric power equipment, and nuclear power." She added, "Today, rather than focusing on the index, I expect a rotational market led by previously neglected sectors such as domestic demand and cyclicals."

Kim Ji-won, a researcher at KB Securities, also diagnosed, "While the prevailing view is that the Middle East issue will not have a prolonged impact on the stock market, the fatigue from the recent rapid rise is actually a burden for the domestic market."

Now, the market's attention is turning to the regular Federal Open Market Committee (FOMC) meeting to be held by the Federal Reserve on June 17-18. Byun Jun-ho, a researcher at IBK Investment & Securities, pointed out, "At the June FOMC scheduled for this week, the Fed is expected to keep its benchmark interest rate unchanged and maintain a wait-and-see stance." He added, "It is necessary to watch whether the domestic stock market will enter a consolidation phase due to the expansion of Middle East risks and the weakening of expectations for a Fed rate cut." He assessed that this is a time to consider a strategy of buying on dips during corrections rather than chasing the rally hastily.