[Good Morning Stock Market] Amid June's Rise Expectations, 'Tapering Concerns' Fill Caution Sentiment

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[Asia Economy Reporter Lee Seon-ae] The U.S. stock market is expected to remain cautious this week. It will be closed tonight for Memorial Day, and with employment data and Federal Reserve (Fed) Chair Jerome Powell's speech emerging as key variables, a pause in the market is anticipated. Typically, the U.S. vacation season officially begins in June, and statistically, the stock market often stagnates during the summer. The Wall Street Journal predicted, "This week's employment report will be a pivotal indicator that moves the Fed." If a recovery in employment becomes visible following inflation, pressure for asset purchase tapering could increase. Conversely, tapering discussions may retreat. Currently, the Fed is placing more emphasis on employment than inflation. The domestic stock market is expected to continue a volatile trend amid rising COVID-19 vaccination rates and expectations for improved corporate earnings, but also ongoing concerns about U.S. tapering and cautious, subdued investor sentiment.

◆ Chaehyun Ki, Researcher at Cape Investment & Securities= Last week, the market rose moderately as rotation occurred among sectors due to expanded expectations for economic reopening and a slight easing of inflation concerns. Within cyclical sectors, steel and chemical industries underperformed, but financial and construction sectors showed good returns. This is seen as profit-taking on sectors that surged sharply in the short term. This week, as expectations for economic reopening continue with expanded vaccination rates, interest in consumer discretionary sectors (such as cosmetics) will persist. Also, with favorable May export data expected, buying in the automobile sector, which has a high export ratio among consumer discretionary sectors, remains valid. From a mid- to long-term perspective through the second half of the year, there are also opportunities for bargain buying in growth sectors like semiconductors.

Meanwhile, COVID-19 vaccinations for the general population aged 65 to 74 began in Korea on the 27th, leading to a rapid increase in vaccination rates. Korea's vaccination rate (at least one dose) was 7.8% on the 26th and reached 10.1% as of the 28th, rising 2.3 percentage points in just two days. Korea's vaccination speed, increasing by about 1 percentage point per day, is very fast. If domestic vaccine supply proceeds smoothly, the vaccination rate could reach 60% by the end of July, and achieving herd immunity at 70% by the end of August is highly possible. As Korea's vaccination rate is expected to rise rapidly, interest in reopening-themed sectors (aviation, travel, leisure) is expected to continue.

◆ Seo Jeong-hoon, Researcher at Samsung Securities= The current strength of the yuan is linked to the global economic recovery trend. When establishing sector strategies for the domestic stock market, it is important to focus on export-type cyclical stocks that can respond sensitively to this. It appears that overheating in these sectors has been substantially resolved during May. Considering the economic recovery momentum spreading from developed to emerging markets, major government fiscal spending, and the possibility of a weaker dollar, the downside of commodity prices should be firmly supported. Additionally, supply shortages scattered everywhere are likely to stabilize as bottlenecks are resolved.

If stable demand at the front end is maintained and concerns about margin compression ease, the strong performance of domestic cyclical sectors is likely to resume. Since the economic cycle has not yet fully matured and major countries' investments are in early stages, attention should be paid to upstream sectors with strong pricing power. Energy, chemical, and steel stocks fall into this category, and transportation sectors may also be included. Although clear fundamental improvements are still lacking, considering the yuan's strength, expectations for economic activity resumption, and remaining price appeal, Chinese consumer-related stocks can also be approached from a trading perspective. Furthermore, with increased interest in China and a growing preference for emerging markets overall, the return of foreign investors should be anticipated. It may be worthwhile to increase the weighting of automobile and semiconductor stocks, which have seen significant foreign selling from a mid- to long-term perspective. Above all, it is important not to feel vague pressure on the index's upside. Although the index has reached previous highs, the price-to-earnings ratio (PER) multiple has fallen to the level of late October last year (12 times). At that time, the KOSPI index was 1,000 points lower than now.

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