[Good Morning Market] "Strategic Moves Over Fed Chair Candidate's Stance... Focus on Leading Stocks' Earnings Events"

Kiwoom Securities: "Weekly KOSPI Expected Range, 5,050-5,350 Points"
"Focus on KOSDAQ Trading Expected to Continue for Now"

This week, analysts in the securities industry have noted that the Korean stock market should pay close attention to the earnings announcements of leading domestic and international stocks, amid a wait-and-see atmosphere surrounding the policy stance of the next U.S. Federal Reserve (Fed) Chair candidate.

On the 2nd, Kiwoom Securities stated, "The domestic stock market is expected to see increased volatility as the U.S. stock market undergoes corrections and the aftershocks of a precious metals crash continue, while strategic moves unfold over the analysis of the next Fed Chair's policy stance." The firm set the weekly KOSPI forecast range at 5,050 to 5,350 points.

"Nomination of Fed Chair Candidate Will Increase Volatility, but Impact Will Be Limited"

Previously, on January 30 (local time), U.S. President Donald Trump nominated former Fed Governor Kevin Warsh as the 17th Chair of the Fed. Global asset markets were shaken. Amid projections that Warsh, known as a "hawkish dove," could simultaneously cut interest rates and reduce liquidity, prices of precious metals and virtual assets plummeted, while the value of the U.S. dollar rose.

Experts anticipate that if Warsh becomes the head of the Fed, there is a possibility of a short-term rate cut. However, they also expect that, in the medium to long term, he will maintain the independence of the Fed and continue with credible monetary policy.

Lee Kyungmin, a researcher at Daishin Securities, said, "The nomination of former Governor Warsh, who is considered a hawkish figure, is fueling concerns over liquidity instability. For the time being, we need to consider increased volatility in rapidly rising assets and financial markets," adding, "If, during the process of cooling off short-term overheating and alleviating upward fatigue, the Fed secures its independence and the more accommodative stance of Warsh compared to the past becomes exposed and learned by the market, volatility will gradually subside."

Han Ji-young, a researcher at Kiwoom Securities, pointed out, "Although volatility is expected to increase, the price volatility triggered solely by the nomination of the next Fed Chair will likely be short-lived," and "it is more appropriate to focus on market responses to key U.S. economic indicators, such as the earnings of leading stocks scheduled for this week and the January nonfarm payrolls, which will be free from shutdown effects, rather than the nomination itself."

"Consider Potential Shift in Fund Flows to Sectors Announcing Earnings"

In the United States, earnings announcements are scheduled for companies such as Alphabet, Amazon, Palantir, AMD, and other Magnificent 7 (M7) and artificial intelligence (AI)-related stocks. As seen last week, when Meta and Microsoft each rose by 10% and fell by 10% after their earnings reports, the market is increasingly eager to confirm the justification for large-scale capital expenditures through profitability.

In the Korean stock market, leading stocks in shipbuilding, defense, and banking-such as Hanwha Ocean, Korea Aerospace Industries, and KB Financial Group-are awaiting their earnings releases. One researcher commented, "Last week, despite the KOSDAQ's surge, KOSPI stocks in semiconductors and automobiles did not gain much upward momentum due to a perceived lack of catalysts." The researcher added, "However, unique factors such as order momentum and shareholder returns remain valid, so it is important to incorporate the possibility of a shift in fund flows to these sectors after the earnings announcements into your strategy."

A trader is working at the New York Stock Exchange in the United States. Photo by Reuters Yonhap News Agency

For now, domestic market participants are expected to continue focusing their trading on the KOSDAQ. The researcher noted, "In reality, all attention in the domestic stock market is concentrated on the KOSDAQ," adding, "The KOSDAQ's January return was 24.2%, ranking among the top five since records began in 1996. There is still strong optimism for the government-driven KOSDAQ 3,000-point target, and aggressive buying sentiment among individual investors, especially through exchange-traded funds (ETFs), shows no sign of weakening."

He continued, "Currently, the KOSDAQ is in an environment where prices can rise based on expectations and fund flows, rather than on earnings or valuation factors. However, uncertainties originating from the United States-such as the next Fed Chair and the aftershocks of the precious metals crash-could increase incentives for profit-taking following last week's surge. Therefore, in the short term, it is advisable to approach the market from a trading perspective."

Meanwhile, on January 30 (local time), the New York Stock Exchange closed broadly lower. At the New York Stock Exchange, the blue-chip Dow Jones Industrial Average fell by 179.09 points (0.36%) from the previous session to close at 48,892.47. The large-cap S&P 500 Index dropped by 29.98 points (0.43%) to finish at 6,939.03, while the tech-heavy Nasdaq Composite Index declined by 225.30 points (0.94%) to 23,461.82.