[Good Morning Stock Market] KOSPI Lacks Clear Direction, Sectoral Market Outlook... "Focus on Cyclical Stocks"

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[Asia Economy Reporter Park Jihwan] The domestic stock market is fluctuating without establishing a clear direction. Domestic market experts predict that a sector-by-sector rotation driven by individual corporate issues will continue for the time being. Given the growing expectations for global economic normalization, they advise focusing on cyclical stocks.

◆ Seosangyoung, Researcher at Mirae Asset Securities= Despite the strong performance of the US stock market the previous day, the Korean stock market temporarily widened its losses due to net selling by foreigners ahead of the MSCI (Morgan Stanley Capital International) rebalancing implementation. However, the market narrowed its losses and closed higher amid expectations of economic improvement, such as the Bank of Korea’s upward revision of the growth forecast to 4.0%. Notably, the news of a phone call between Chinese Vice Premier Liu He and Katherine Tai, US Trade Representative, was also a positive factor. Meanwhile, the US stock market is expected to maintain solid investor sentiment due to ongoing expectations for economic normalization, including employment improvements. However, considering that selling pressure was concentrated on large tech stocks and the market remained flat, it is expected that the market will continue to fluctuate based on individual stock issues.

Of course, the ongoing expansion of vaccination rates in the US and European countries, Airbus’s announcement of large-scale production plans, and GM’s factory restarts all support expectations for economic normalization. However, it is worth noting that some untact-related stocks, despite reporting good earnings, are underperforming, indicating that the market is showing a sector rotation based on individual stock issues amid a lack of clear direction.

Considering this, the Korean stock market is expected to continue a cautious stance ahead of major economic indicators such as US inflation data, with a sector rotation market unfolding.

◆ Han Jiyoung, Researcher at Kiwoom Securities= The Korean stock market is expected to show a firm but slightly positive trend influenced by continued momentum in cyclical stocks and caution ahead of the US inflation data release. With the MSCI rebalancing completed in the previous trading day, foreign investors who showed aggressive net selling in May may switch to net buying.

However, considering the uncertainty surrounding the upcoming April US PCE inflation data to be released tonight, net buying is expected to be limited. Although much of this has already been priced in, the renewed market news flow regarding US infrastructure investment expectations is likely to be favorable for domestic materials and industrial sectors. Additionally, the announcement by US GM (+2.9%) that it will gradually restart factories worldwide, including in North America and Korea, which had been halted due to vehicle semiconductor shortages, is also expected to influence the sector rotation in the domestic market.

◆ Kim Daejun, Researcher at Korea Investment & Securities= Starting in the second half of the year, domestic demand in Korea could pick up significantly, similar to the US and UK. The Bank of Korea’s May economic outlook report forecasts a 4% increase in private consumption in the second half compared to the previous year, contrasting with the 1% growth in the first half. While the situation needs to be monitored further, the EU has seen a rapid increase in vaccination rates since the full-scale introduction of the Pfizer vaccine in April. Currently, only 10% of the domestic population has received the first dose, but this could change with strengthened incentives and the full-scale supply of Moderna vaccines.

This trend is already reflected in the stock market. So far, consumer stocks are rising more than the materials and energy sectors, which have led the cyclical style. Looking at sector returns this week, hotel leisure, cosmetics, and distribution sectors have shown relative strength compared to the index. It is now time to gradually pay attention to consumer discretionary stocks as well.

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