[Market ING] KOSPI Expected to Attempt to Settle Above 5,000, Eyes on FOMC

Weekly KOSPI Forecast Band: 4,800 to 5,100 Points

The KOSPI surpassed the 5,000-point mark during intraday trading last week, ushering in the era of the "Ocheonpi." However, after breaking through 5,000, the upward momentum has slowed, and the index has not yet firmly settled above this level. This week, the market is expected to attempt to solidify its position above 5,000 as it digests the January Federal Open Market Committee (FOMC) meeting in the United States and the start of the earnings season in earnest.

Yonhap News Agency

Last week, the KOSPI rose by 3.08%, while the KOSDAQ gained 4.12%. Although the KOSPI experienced a decline on January 20 due to the Greenland tariff issue, ending a 13-day winning streak, it quickly rebounded the next day and succeeded in breaking through the 5,000-point mark. Kim Jongmin, a researcher at Samsung Securities, commented, "During intraday trading, the KOSPI witnessed the dream level of 5,000 points, and the KOSDAQ is on the verge of reclaiming 1,000 points. This is a remarkable achievement, coming just three months after surpassing 4,000 points for the first time in October last year. Currently, there appear to be no adverse factors to halt this momentum. The macroeconomic environment is enjoying an ideal 'Goldilocks' phase, and corporate earnings momentum is spreading across the board. Even the previously concerning geopolitical risks have been alleviated as President Donald Trump has once again backed down, displaying the so-called 'TACO' (Trump Always Caves on Tariffs) pattern, thereby justifying the index's move to higher levels."

However, the rapid rise has led to persistent fatigue in the market, increasing the likelihood of a correction. Kim added, "With the market climbing so steeply, we have entered a zone where chasing the rally feels burdensome. Geopolitical tensions, which could resurface at any time, concerns over liquidity tightening due to rising U.S. and Japanese government bond yields, and issues regarding the independence of the Federal Reserve are all potential variables that could shake the market if triggered. Given the relentless rally, it is time to consider the possibility of a technical cooldown to ease overheating."

The rotational rally that drove the KOSPI past 5,000 is expected to continue. Previously, semiconductors led the charge, followed by the automobile sector, resulting in the breakthrough of the 5,000-point milestone. Kim explained, "Looking back at the period of adjustment after the KOSPI surpassed the key levels of 3,000 and 4,000 points last year, we saw a rotational rally where laggard stocks filled the gap while leading sectors (shipbuilding, defense, nuclear power in the first half; semiconductors in the second half) took a breather. A similar pattern is likely to unfold after the recent 5,000-point breakthrough. In other words, while leaders such as semiconductors and automobiles (physical AI) pause, laggard stocks may step up to catch up."

Na Jeonghwan, a researcher at NH Investment & Securities, stated, "We are witnessing rapid gains as key stocks in the AI value chain-semiconductors, physical AI (automobiles), power equipment, nuclear power, and secondary batteries (ESS)-rotate. If interest in the existing leading sectors wanes, we should consider the possibility of funds shifting to relatively neglected sectors." NH Investment & Securities presented a forecast band for the KOSPI this week between 4,800 and 5,100 points.

This week’s key events include the release of U.S. November durable goods orders on January 26 and the January Dallas Federal Reserve Bank manufacturing index on January 27. On January 28, the January Richmond Fed manufacturing index and the January Conference Board consumer confidence index will be announced. The January FOMC is scheduled for January 29, and the U.S. December producer price index (PPI) will be released on January 30.

Lee Kyungmin, a researcher at Daishin Securities, commented, "For the upward cycle of the KOSPI and global stock markets to continue, it is crucial that the consensus (average of brokerage forecasts) remains that the Fed’s rate-cutting cycle, a key pillar of the policy mix driving the major rally in 2026, will persist. The January policy rate is widely expected to remain unchanged, and the market will likely react more sensitively to the direction and terminal rate than to the cut itself." He added, "Depending on the Fed’s monetary policy stance, recent assessments of inflation and employment, confirmation of political independence, and stabilization of bond yields, we expect attempts at a rebound in growth stocks to strengthen."

Major earnings announcements from U.S. big tech firms and leading domestic companies are also scheduled. On January 28, Microsoft, Meta, Tesla, ASML, and IBM will release their results, followed by Apple, Amazon, Visa, and Mastercard on January 29. Among Korean companies, Kia and SK Innovation will announce their fourth-quarter results on January 28, while SK Hynix, LG Energy Solution, and Samsung Electronics will do so on January 29. Na stated, "In addition to the FOMC, major big tech earnings are scheduled this week. Depending on the cloud division revenues and guidance from Microsoft and Amazon, expectations for AI computation demand may fluctuate. This could serve as a variable for semiconductor and power sectors related to AI infrastructure."

The earnings results of Samsung Electronics and SK Hynix, to be announced on January 29, are expected to influence the continued upward momentum of the KOSPI. Lee noted, "The sustainability of the rally will depend on the guidance and outlook of leading semiconductor companies. The recent semiconductor supercycle, earnings expectations, and upward revisions of forecasts have led to higher forward earnings per share (EPS) for the KOSPI, enabling the index’s record highs and the breakthrough of the 5,000-point mark."