Stagnant Stock Market, Will the Korea-US Summit Be a Breakthrough?

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] Attention is focused on whether the Korea-US summit will provide a breakthrough amid the stock market's sluggish trend.

On the 24th, the KOSPI showed a mixed trend in the early session. As of 9:45 a.m., the KOSPI recorded 3,147.54, down 8.88 points (0.28%) from the previous day. It opened weak, turned to an upward trend, and then switched back to weakness.

The KOSPI, which closed at an all-time high on the 10th, has since faced the obstacle of inflation and has been moving within a box range of 3,170 to 3,120. It only rose 0.1% over the past week. Individuals and institutions net bought 8.3929 trillion won and 585 billion won respectively this month, but foreigners sold off 8.7704 trillion won, preventing the index from rebounding. Foreigners have maintained a selling trend in the domestic stock market for five consecutive weeks until last week.

In this situation, the Korea-US summit is expected to be an opportunity for the KOSPI to be re-evaluated. Lee Kyungmin, a researcher at Daishin Securities, said, "This Korea-US summit is meaningful as it served as an opportunity to strengthen the future-oriented partnership between Korea and the US, addressing current challenges such as overcoming COVID-19, vaccine supply, and issues related to the recognition of global manufacturing supply chains including semiconductors." He added, "The US showed the future it aims to pursue, and since Korea's necessity in the US's future course was reaffirmed, it will be an opportunity for the re-evaluation of Korea's economy, industry, and financial markets." Lee also said, "Amid changes in the global investment environment, the Korea-US summit will enhance the attractiveness of the Korean stock market," adding, "Direct investment in sectors positioned at the top of the KOSPI market capitalization such as semiconductors, automobiles, secondary batteries, and pharmaceuticals/biotech, along with the positive momentum from strengthened partnerships, will support the strengthening of the KOSPI's upward trend."

The stock market is expected to gradually raise its bottom. Han Ji-young, a researcher at Kiwoom Securities, said, "Although market participants appear fatigued due to continuous volatility, the market will show a firm upward trend by raising the bottom," and added, "This week, the KOSPI is expected to move between 3,130 and 3,230."

While the domestic stock market remains sensitive to negative factors, there is also a need to pay attention to positive factors. Han said, "As of the 20th of this month, Korea's exports grew 53% year-on-year, showing a favorable trend centered on key items such as automobiles, semiconductors, and petroleum products," and analyzed, "The price-earnings ratio (PER) valuation of the domestic stock market at the current index level in early May (mid-to-high 11 times) is not a heavy burden compared to the PER valuation (13 to 15 times) at the same index level since the beginning of the year, which will support the downside of the domestic stock market experiencing uncomfortable volatility."

This content was produced with the assistance of AI translation services.