[Market ING] Will the KOSPI Reclaim 3,200 Amid Tariff Uncertainty?

Weekly KOSPI Expected Range: 2,950 to 3,250

Due to tariff uncertainties, the KOSPI index fell below the 3,200 mark last week. This week, the KOSPI is expected to attempt to reclaim the 3,200 level, influenced by trade negotiations, the proposed tax law revisions, and the July Federal Open Market Committee (FOMC) meeting in the United States.

Yonhap News

Last week, the KOSPI rose by 0.25%, while the KOSDAQ declined by 1.67%. Na Jeonghwan, a researcher at NH Investment & Securities, analyzed, "The 3,200 level is acting as a resistance for the KOSPI, with the index repeatedly rising and falling around this point." He added, "Concerns over the expiration of the U.S. reciprocal tariffs deferral on August 1 and profit-taking are having an impact." He further stated, "News that the government is considering including a securities transaction tax increase and stricter major shareholder requirements in the proposed tax law revisions also negatively affected investor sentiment."

Tariff uncertainty is expected to persist this week. Na explained, "After the Korea-U.S. 2+2 trade talks fell through, the highest-level meetings are facing difficulties. Since President Donald Trump and U.S. Treasury Secretary Scott Besant have overseas schedules remaining in July, it will be difficult to lower the tariff rate through negotiations before the August 1 deadline for the confirmation of the 25% reciprocal tariffs." He continued, "Ongoing tariff uncertainty will continue to be a burden for export-related stocks."

However, there are projections that a positive outcome from the trade negotiations could allow the KOSPI to reach new record highs. Shin Seungjin, a researcher at Samsung Securities, commented, "The KOSPI has been undergoing a period of adjustment around the 3,200 level. As the August 1 reciprocal tariff deferral deadline approaches, uncertainty in Korea-U.S. trade negotiations is limiting further gains in the market." He added, "In contrast, the Japanese stock market, which reached a tariff agreement with the U.S., surged 4% last week and is on the verge of reaching a historic high, while the U.S. Nasdaq and S&P 500 are also showing record-breaking trends." He further noted, "The outcome of the Korea-U.S. trade negotiations will be a significant turning point for our stock market. If positive results are achieved before or after the August 1 reciprocal tariff announcement, our market could also break through to new record highs."

The proposed tax law revisions are also a variable. Kang Jinhyuk, a researcher at Shinhan Investment Corp., said, "There is a gap between market expectations and the positions of the government and ruling party on various stock market issues, such as the restructuring of dividend income taxation and the tightening of major shareholder capital gains tax standards. As a result, there is a possibility of increased selling pressure after the details are made public." Na added, "Concerns that negative policies may be introduced for the domestic stock market are acting as a factor limiting the upper end of stock prices. While a corporate tax increase would negatively affect earnings, if the proposed tax law revisions include separate taxation for dividends, it could partially offset the negative impact."

There is also an opinion that, amid tariff risks, domestic consumption-related stocks deserve attention. Na said, "When tariff risks become prominent, I prefer domestic consumption-related stocks." He continued, "In particular, the recovery in Korea's private consumption in the second quarter and the planned distribution of livelihood consumption coupons are favorable for domestic consumption stocks. Sectors such as cosmetics, which are expected to post strong second-quarter results, and domestic and duty-free industries, which could benefit from the summer vacation season and increased tourism, also warrant attention." NH Investment & Securities suggested a projected KOSPI range of 2,950 to 3,250 for this week.

This week's key events include the release of the U.S. July Dallas Federal Reserve Bank Manufacturing Index on the 28th, and the U.S. July Conference Board Consumer Confidence Index on the 29th. On the 30th, the U.S. second-quarter GDP will be announced. On the 31st, the results of the July FOMC meeting will be released, along with the U.S. July Personal Consumption Expenditures (PCE) Price Index and China's July National Bureau of Statistics Manufacturing Purchasing Managers' Index (PMI). On August 1, Korea's July exports, the U.S. July employment report, the U.S. July Institute for Supply Management (ISM) Manufacturing Index, and China's July Caixin Manufacturing PMI will be published.

Major earnings announcements from U.S. and domestic companies will also continue. On the 29th, P&G, Visa, PayPal, and Boeing will release their results; on the 30th, Microsoft (MS) and Meta; and on the 31st, Apple. Among domestic companies, Doosan Robotics and Hyundai Autoever will announce their results on the 28th; Krafton, Hanwha Ocean, and Korea Aerospace Industries on the 29th; Samsung C&T and Kiwoom Securities on the 30th; and Samsung Electronics and Hanwha Aerospace on the 31st.

Lee Kyungmin, a researcher at Daishin Securities, commented, "The July FOMC is expected to be a major turning point for monetary policy in the second half of the year, and a rate freeze in July is almost certain." He added, "The Trump administration's pressure for a rate cut is intensifying, and there are divided opinions within the Federal Reserve (Fed). The market will be closely watching whether Fed Chair Jerome Powell, who has taken a strong stance on rate cuts, will change or maintain his position."