[Market ING] KOSPI Attempts to Settle Above 5,300 Amid Unstoppable Momentum

Weekly KOSPI Expected Trading Range: 4,900?5,300

The KOSPI surged past the 5,300 mark during intraday trading last week, continuing its strong upward momentum. As key U.S. employment and economic indicators, as well as corporate earnings announcements, are scheduled for this week, the market is expected to see ongoing sector rotation.

Yonhap News Agency

Last week, the KOSPI rose by 4.70% and the KOSDAQ by 15.65%. After successfully settling above the 5,000 level, the KOSPI went on to surpass the 5,100, 5,200, and 5,300 thresholds in succession. The KOSDAQ recovered the 1,000 mark for the first time in over four years and climbed above 1,100. Lee Kyungmin, a researcher at Daishin Securities, analyzed, "This year, with heightened expectations for artificial intelligence (AI), semiconductors and automobiles (physical AI), which are leading sectors, have alternated in driving the market. At the same time, as the fourth-quarter earnings season has kicked off in earnest, sector rotation is accelerating," adding, "This is promoting a broadening of capital flows to stocks surrounding the leading sectors."

Na Jeonghwan, a researcher at NH Investment & Securities, said, "As the KOSPI reached the 5,000 level, market attention has shifted to the KOSDAQ, which has lagged behind in comparison." He explained, "In particular, after news broke on the 22nd that the KOSPI 5000 Special Committee had proposed to President Lee Jaemyung the goal of reaching 3,000 points on the KOSDAQ, expectations for government policies to revitalize the KOSDAQ have grown significantly. As a result, strong capital inflows into exchange-traded funds (ETFs) and leveraged ETFs tracking the KOSDAQ150 index have pushed the KOSDAQ to its highest level since the dot-com bubble."

However, as the earnings season passes its peak, there is a possibility that the market may enter a short-term consolidation phase. Researcher Lee said, "With the earnings season peaking, the sharp rise in earnings forecasts is stabilizing. As investors monitor key global economic indicators and monetary policy events, the KOSPI may enter a short-term consolidation phase," adding, "Sector rotation into undervalued industries relative to earnings, such as energy, healthcare, IT hardware, consumer staples, and hotels and leisure, is expected."

Researcher Na stated, "On February 3, the U.S. ISM manufacturing and services indices for January will be released, and on February 6, the U.S. employment report for January is scheduled. However, given the content of the Federal Open Market Committee (FOMC), the likelihood of a rate cut in the first quarter is low, so the impact of these indicators on stock prices is expected to be limited." He continued, "However, as the U.S. Federal Reserve's assessment of the economy is being revised upward, it will be important to gradually increase attention to materials, industrials, and consumer discretionary sectors, which are highly sensitive to earnings in an economic recovery phase. While maintaining a focus on AI-driven leading sectors, it will be effective to gradually increase exposure to cyclical sectors during periods of improved economic outlook in order to enhance returns." NH Investment & Securities presented this week's expected KOSPI trading band as 4,900 to 5,300.

This week's key events include the release of the U.S. January ISM Manufacturing Index on February 3, the U.S. January ADP private employment numbers and December Job Openings and Labor Turnover Survey (JOLTs) on February 4, the U.S. January ISM Services Index and the European Central Bank (ECB) monetary policy meeting for February on February 5, and the U.S. January employment report on February 6.

Researcher Lee commented, "Ahead of the release of U.S. employment indicators this week, if the data meets expectations and shows solid employment, the current balanced outlook for monetary policy could be maintained." He added, "The December ADP private employment number, to be released on February 4, is expected to be 48,000, up from 41,000 the previous month; the December nonfarm payrolls, to be announced on the night of February 6, are projected at 70,000, up from 50,000 the previous month; and the unemployment rate is expected to remain unchanged at 4.4%. Overall, the employment data is expected to show modest improvement." He further noted, "Although the employment report will be released after the market closes this week, market caution is not expected to be high."

Corporate earnings announcements will also continue. On February 2, Palantir will release its results, followed by AMD and Merck on February 3, Alphabet, Eli Lilly, and Qualcomm on February 4, and Amazon on February 5. Among Korean companies, Samsung SDI will announce its fourth-quarter results on February 2, Hanwha Ocean on February 4, and Ecopro and KB Financial on February 5.