Will the KOSPI, Having Surpassed the 3,500 Mark, Continue to Set New Records After the Holiday? [Market ING]

The KOSPI has reached the historic milestone of the 3,500 level and has now entered a period of pause. Attention is now focused on whether the upward momentum of the KOSPI will continue after the long holiday.

Yonhap News Agency

Last week, the KOSPI rose by 4.82%, while the KOSDAQ increased by 2.28%. Previously, the KOSPI had hesitated just before the 3,500 mark, but thanks to the strong performance of the semiconductor sector, it ultimately broke through this level. Lim Jeongeun, a researcher at KB Securities, stated, "On October 2, driven by positive sentiment in artificial intelligence (AI) and semiconductors, the KOSPI closed above 3,540 for the first time ever, with an intraday gain of over 100 points. This led to the achievement of the so-called '90,000 Electronics' and '400,000 Nix' milestones." Lim also analyzed, "With the surge in AI demand, a semiconductor super cycle is expected, which has been driving the recent stock market rally. The stock prices of Samsung Electronics and SK Hynix soared as they joined OpenAI and Stargate as strategic partners."

Foreign investors' buying was the driving force behind the KOSPI's rise to 3,500. On October 2 alone, foreign investors recorded a net purchase of 3.1399 trillion won in the Korea Exchange. They continued their buying streak for four consecutive days. Last week, foreign investors bought a net 2.6082 trillion won of Samsung Electronics shares, making it their top purchase, followed by a net 507 billion won in SK Hynix. Lee Jaewon, a researcher at Shinhan Investment & Securities, commented, "On October 2, foreign investors made a net purchase of about 3.2 trillion won in KOSPI spot stocks, with 2.4 trillion won of that flowing into the electrical and electronics (semiconductor) sector." He added, "Risk-off sentiment ahead of the long Chuseok holiday was no match for foreign investors' enthusiasm for semiconductors."

The foreign buying trend is expected to continue for the time being. Lee Euntaek, a researcher at KB Securities, explained, "Typically, foreign investors buy more stocks when the Korean won is strong, but recently, inflows have moved regardless of the exchange rate." He continued, "This is likely because the inflows are mainly from active funds, which can tolerate higher volatility than passive funds. If active foreign buying continues, it is unlikely that their preference for sectors with high expectations for third-quarter earnings, such as industrials or IT, will change."

In the past, U.S. economic indicators released while the Korean stock market was closed for the Chuseok holiday were reflected all at once after the break. However, this time, things are expected to be different, as the release of these indicators has been delayed due to the U.S. federal government shutdown (temporary suspension of operations). The September jobs report, which was scheduled for October 3 (local time), has been postponed. Jeong Haechang, a researcher at Daishin Securities, commented, "If the shutdown is prolonged, the release of the Consumer Price Index (CPI) scheduled for the 15th and the Producer Price Index (PPI) scheduled for the 16th could also be delayed." He added, "During the 35-day shutdown in 2018, the release of employment, inflation, and gross domestic product (GDP) data was delayed by two to four weeks after the shutdown ended. Considering this, there is a possibility that the Federal Open Market Committee (FOMC) in October may have to decide monetary policy without September economic data, which could prompt a precautionary rate cut." He further stated, "While optimism currently prevails regarding the impact of the U.S. government shutdown on the stock market, if the situation drags on and permanent layoffs of federal employees become a reality, concerns about the economy could gradually intensify."

This week, major events include the release of the September FOMC minutes on October 9 and the announcement of the University of Michigan's U.S. Consumer Sentiment Index for October on October 10.