[Good Morning Market] KOSPI Expected to Open Higher... Gains Likely Limited by Profit-Taking

On June 25, the KOSPI is expected to open higher. However, gains are likely to be limited due to profit-taking following the sharp rise in the previous session.

In the previous session, the Dow Jones Industrial Average in New York closed at 42,581.78, up 374.96 points (0.89%) from the previous day. The S&P 500 Index ended at 6,025.17, up 57.33 points (0.96%), and the tech-heavy Nasdaq Composite finished at 19,630.98, up 183.57 points (0.94%) from the previous session.

Despite a 'shock' in the June Conference Board Consumer Confidence Index, which fell far short of market expectations, the New York stock market closed higher, supported by easing geopolitical risks and strength in the semiconductor sector.

The Consumer Confidence Index for June, released that day, came in at 93.0, significantly below the market consensus of 99.4, fueling concerns about an economic slowdown. However, as the possibility of war between Israel and Iran effectively entered a ceasefire phase, geopolitical risks from the Middle East eased. Additionally, strong performance in the Philadelphia Semiconductor Index (up 3.8%), led by Micron (up 4.8%), drove the market upward.

Also, Jerome Powell, Chair of the U.S. Federal Reserve, maintained a neutral stance in his speech, reiterating that the Fed would not rush its decisions. While Christopher Waller, a Fed Governor, and Michelle Bowman, Vice Chair, recently mentioned the possibility of a rate cut in July, Powell dismissed the likelihood, stating that it is still necessary to monitor the impact of external factors such as tariffs.

In the previous session, the domestic stock market surged, led by semiconductors, as positive factors such as news of a ceasefire between Israel and Iran, optimism over Micron's earnings in the U.S., and the launch of the government's 'KOSPI 5000 Points Special Committee' all contributed to the rally.

On this day, the domestic stock market is also expected to open higher, supported by favorable external conditions such as Federal Reserve Chair Powell's uneventful remarks and a sharp rise in the Philadelphia Semiconductor Index. However, some analysts expect that intraday gains may be limited due to profit-taking after the previous day's sharp rally.

Currently, the KOSPI has risen by about 400 points since June. This is the first time since September 2021, and the monthly gain of 15.1% in June is the largest since the 19.7% increase during the dot-com bubble in November 2001, marking the biggest monthly rise in 23 years. In terms of monthly returns over the past 30 years, this ranks among the top 10 on record.

Notably, while the so-called 'Donghak Ant' rally in 2021 was driven by individual investors, the current rally is distinguished by being led by foreign investors. The background for foreign buying is attributed to expectations for policy-driven re-rating, such as improvements in corporate governance.

Han Ji-young, a researcher at Kiwoom Securities, stated, "If the policy-driven re-rating trend continues, it is reasonable to leave room for the KOSPI to rise to its historical high of around 3,300 points (PBR 1.1 times). However, in the short term, there is a possibility that external macro variables, such as U.S. tariff policy, the Fed's rate decisions, and global economic trends, may once again come into play. Therefore, while there is room for further index gains, it is time to adopt strategies that prepare for profit-taking and consolidation in sectors that have surged sharply in the short term."

He also analyzed, "In the MSCI annual market classification results announced early this morning, Korea failed to be listed as a candidate for inclusion in the developed market index. However, the recent net buying of Korean stocks by foreigners is driven more by expectations of resolving the Korea Discount based on government policy than by hopes for MSCI inclusion, so the failure to be included in the MSCI index this time is likely to have only a limited impact on foreign capital flows."