[Good Morning Market] All Eyes on Tariff Talks and Samsung Earnings: "Volatility Expected in Korean Stocks"

This week, the Korean stock market is expected to remain volatile ahead of major events such as the outcome of tariff negotiations, Samsung Electronics' preliminary earnings, and the Bank of Korea's Monetary Policy Board meeting.

Yonhap News

On July 4, with the New York stock market closed for Independence Day, European markets ended lower across the board due to uncertainty over tariffs stemming from former President Donald Trump. The German DAX index closed at 23,787.45, down 146.68 points (0.61%) from the previous trading day. The French CAC 40 index fell by 58.28 points (0.75%) to 7,696.27, while the UK FTSE 100 index ended at 8,822.91, down 0.29 points (0.00%). In particular, the financial and automotive sectors led the decline, driven by investor anxiety following President Trump's announcement of reciprocal tariffs.

President Trump has declared that he will send tariff-related letters to 12 countries on July 7. With tariff rates being discussed at levels as high as 60-70%, this is weighing on the market. Major stock markets, which had shown low sensitivity to tariffs for some time, are expected to become increasingly sensitive as the deadline for the expiration of reciprocal tariff exemptions approaches on July 8. However, since there is a possibility that the new tariffs may be fully implemented starting August 1, countries such as Korea still have room for negotiation this month.

The domestic stock market is also expected to fluctuate this week depending on the direction of tariff negotiations with the United States. Since tariff negotiations are directly linked to the profitability of export-oriented companies, foreign investor flows in the semiconductor and automotive sectors are likely to respond sensitively. Han Ji-young and Lee Sunghoon, analysts at Kiwoom Securities, stated, "An increase in tariff burdens could cause further deterioration in the profitability of Korean export stocks," adding, "This poses a risk of downward pressure not only on the semiconductor and automotive sectors, which are currently confirming a bottom in share prices after recent tariff-induced price adjustments, but also across the broader KOSPI market." However, they also noted, "There is a possibility that the Korean trade negotiation team, currently visiting the United States, could secure lower reciprocal tariff rates or an additional extension, so there is no need to bet on the worst-case scenario."

Samsung Electronics' preliminary second-quarter earnings, scheduled for release on July 8, are also expected to be a key variable for the domestic stock market. While Samsung Electronics' share price rose by 6.4% in June?relatively limited compared to the sharp rally in the KOSPI?it has shown an upward trend since the start of July. Attention is focused on whether expectations for a recovery in the business environment in the second half of the year will be reflected in the share price following the earnings announcement.

In addition, it is a negative factor that the shipbuilding, defense, and nuclear power sectors, which had led the market until last month, have seen their declines deepen and their corrections widen since the start of July. Kiwoom Securities analyzed that "whether these sectors' share prices and supply-demand conditions stabilize will influence investor sentiment."