[Market ING] KOSPI Trapped in a Box, Eyes on Economic Indicators

KOSPI Weekly Forecast Band Set at 3,000?3,300

The KOSPI once again failed to recover the 3,200-point level last week. Although the KOSPI had maintained an upward trend since April, it showed sluggish movement within a box range last month and recorded a negative return for the first time in five months. As the market awaits economic indicators ahead of the September meeting of the US Federal Open Market Committee (FOMC), a wait-and-see attitude is expected to continue.

Yonhap News

Last week, the KOSPI rose by 0.55%, while the KOSDAQ increased by 1.84%. Lee Kyungmin, a researcher at Daishin Securities, commented, "Despite having digested major events that heightened market caution, such as the Jackson Hole meeting, Nvidia's earnings, and the Korea-US summit last week, the KOSPI continued to trade sluggishly within a narrow box range near the 3,200-point level." He further analyzed, "Since the second quarter earnings season this year, the KOSPI has been unable to find momentum for either a correction or additional gains."

As September begins, the stock market is expected to closely monitor economic indicators until the September FOMC scheduled for the 17th. The US Personal Consumption Expenditures (PCE) price index for July, released on the 29th of last month (local time), rose 2.6% year-on-year and 0.2% month-on-month, in line with market expectations. The core PCE price index, excluding food and energy, also increased by 2.9% year-on-year and 0.3% month-on-month, again meeting expectations.

Now, market attention is likely to focus on the US August employment report scheduled for the 5th. Researcher Lee stated, "The highlight of this week will be the US August employment data, and the nonfarm payrolls report to be released on the 5th is expected to show an unemployment rate of 4.3%, up from 4.2% in the previous month." He added, "On the other hand, the number of nonfarm payrolls is expected to increase to 80,000, up from 73,000 in the previous month, which could result in conflicting outcomes between household and business surveys. Depending on the results of the employment data, there will inevitably be mixed interpretations regarding expectations for rate cuts and concerns about an economic downturn, which could trigger volatility in the financial markets." He continued, "Until this week, the KOSPI is expected to remain in a wait-and-see mode, weighing various scenarios ahead of the nonfarm payrolls report. Even if market caution temporarily rises, expectations ahead of the September FOMC are likely to provide support at the lower end, increasing the possibility of bargain buying."

Whether expectations for policy support will revive also remains a point of interest. As the regular National Assembly session begins in September, the legislative process could proceed rapidly. Na Jeonghwan, a researcher at NH Investment & Securities, said, "With the Korea-US summit, which had concentrated the government's administrative capacity, now concluded and tariff negotiations entering their final stages, expectations for domestic policy could expand again." He continued, "After the second amendment to the Commercial Act passed on the 25th of last month, the third amendment, which includes a mandate for the cancellation of treasury shares, is scheduled to be discussed during the regular National Assembly session in September. The bill to introduce Business Development Companies (BD), one of the current administration's pledges, also passed the plenary session on the 27th of last month. As the government's pledged policies gradually materialize in September, policy expectations are likely to expand again." NH Investment & Securities suggested a projected KOSPI range of 3,000 to 3,300 for this week.

Major events scheduled for this week include the announcement of Korea's August export data and China's August Caixin Manufacturing Purchasing Managers' Index (PMI) on the 1st. On the 2nd, the US August Institute for Supply Management (ISM) Manufacturing Index will be released, followed by the US July new factory orders on the 3rd. On the 4th, the US August Automatic Data Processing (ADP) employment numbers and the ISM Services Index will be announced. The US August employment report will be released on the 5th.

Kang Jinhyuk, a researcher at Shinhan Investment Corp., said, "For the KOSPI, which is hovering around the 3,200-point level, the US ISM Manufacturing Index and Korea's export data could provide opportunities for a rally in large-cap stocks."