[Good Morning Market] Yen Carry Trade Noise Resurfaces... Will It Hinder the Santa Rally?

On December 2, the domestic stock market is expected to face downward pressure due to a deteriorating macroeconomic environment, including indications of an interest rate hike in Japan. However, the narrowing losses in the New York stock market overnight and the solid fundamental environment of the domestic market are anticipated to support the lower end of the index.

Previously, on December 1 (local time), the New York stock market closed lower across the board as risk aversion spread on the back of the Bank of Japan's (BOJ) signal of an interest rate hike. The Dow Jones Industrial Average, which focuses on blue-chip stocks, fell by 427.09 points (0.9%) to 47,289.33. The S&P 500 Index, centered on large-cap stocks, dropped by 36.46 points (0.53%) to 6,812.63. The Nasdaq Index, led by technology stocks, declined by 89.763 points (0.38%) to close at 23,275.922.

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Han Ji-young, a researcher at Kiwoom Securities, commented, "It is characteristic of the stock market to respond sensitively to new factors, such as the recent uncertainties stemming from overseas central banks." She added, "However, it is also noteworthy that existing uncertainties, such as those related to artificial intelligence (AI) and the Federal Reserve (Fed), are easing." In fact, during the New York trading session, the losses narrowed after Jensen Huang, CEO of Nvidia, made positive comments about the company's graphics processing units (GPUs).

The domestic stock market is also expected to see its index supported by the narrowing losses in the U.S. market, particularly among AI GPU companies like Nvidia. The recent correction in the domestic market has also created valuation-based incentives for entry, which is another positive factor.

The researcher noted, "During today's session, it is important to pay attention not only to the remarks by Fed Chair Jerome Powell (at 10 a.m.) but also to changes in the yen and the Japanese stock market." She explained, "Given that yen carry trade unwinding noise resurfaced amid heightened intraday volatility yesterday, changes in related prices during today's session are likely to influence the domestic market." She added, "Even if stock prices are exposed to downward pressure from such external variables, it is important to focus on the fact that the earnings momentum of the KOSPI is being maintained," recommending a staggered buying approach around the November low of approximately 3,800.

Another point to watch is whether foreign investors, who have recently turned to net selling, will return amid rising expectations for a year-end Santa rally. As foreign investors, who had led the bull market, quickly shifted to net selling since last month, the KOSPI has lost upward momentum near the 4,000 mark, recording declines in eight out of the last nine trading sessions.

Kim Jaeseung, a researcher at Hyundai Motor Securities, stated, "Generally, the direction of the KOSPI is determined by foreign investors, so to assess the future trend of the KOSPI, it is necessary to consider whether foreigners will resume net buying." He predicted, "After December, as concerns over an AI bubble, U.S. liquidity tightening, and volatility in the won-dollar exchange rate subside, foreign investors are expected to gradually return to net buying in the stock market."

As year-end investment destinations, he advised focusing on sectors with improving fundamentals. Kim explained, "Foreign investors tend to show net buying in sectors and stocks with upwardly revised future earnings, and large-cap stocks tend to perform well during periods of foreign net buying." He analyzed, "Given the expectation that foreigners will resume net buying after December, it is important to maintain positions in large-cap stocks, especially semiconductors."