[Good Morning Market] Ongoing Tariff Risks... KOSPI Expected to Decline

On August 6, the KOSPI is expected to decline due to burdens originating from the United States.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,111.74, down 61.90 points (0.14%) from the previous session. The S&P 500 index fell by 30.75 points (0.49%) to 6,299.19, while the Nasdaq Composite ended at 20,916.55, down 137.03 points (0.65%).

The New York stock market opened strongly as artificial intelligence (AI)-related stocks rose following Palantir's strong earnings announcement. However, it closed lower due to weak economic indicators and tariff remarks by President Donald Trump. The Dow index fell by 0.1%, the S&P 500 dropped by 0.5%, and the Nasdaq declined by 0.7%.

In particular, the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) announced on this day was 50.1, significantly below the market expectation of 51.5, fueling concerns over an economic slowdown. This disappointing result follows the ISM Manufacturing PMI and nonfarm employment indicators announced on August 1, indicating that the recently heightened tariff risks are affecting real economic indicators.

The market is closely watching President Trump's tariff policy on semiconductors and pharmaceuticals, which he mentioned will be announced next week. In the case of pharmaceuticals, tariffs as high as 150% for the next 1.5 years and up to 250% thereafter have been signaled, raising the possibility of increased volatility in stock prices by sector. Since the detailed tariff rates have not yet been disclosed, uncertainty surrounding the stock prices of these sectors is expected to increase before and after the announcement.

On the previous day, the domestic stock market closed with the KOSPI up by 1.6% and the KOSDAQ up by 1.9%. Investor sentiment was supported by expectations of a US interest rate cut, the government's proposed tax reform compromise, and optimism about the performance of the secondary battery sector. However, the weak ISM indicators from the US, President Trump's tariff-related remarks, and the sharp after-hours decline (-4%) in AMD's stock price due to margin deterioration, despite strong earnings, are combining to create downward pressure on the domestic stock market.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "Divergent positions among domestic political parties regarding tax reform are causing volatility in the market," and added, "Until a concrete conclusion is reached, noise will continue to flow into the stock market."

She also stated, "Given the persistent risks related to tariffs and taxation, it is more practical to approach the market based on corporate earnings rather than reacting to every piece of news," and diagnosed, "With the second quarter earnings season underway, it is time to take a strategic approach based on changes in analysts' earnings estimates."

She further emphasized, "Since July, sectors with upward revisions to third-quarter earnings estimates include shipbuilding (+14.2%), securities (+8.3%), utilities (+6.5%), trading companies and capital goods (+6.4%), and displays (+5.9%). It is important to pay attention to sectors where earnings momentum is strengthening, even as the market is shaken by uncertainty."