[Good Morning Stock Market] "KOSPI Opens Era of 3300, Profit-Taking Desire Increases"

Philadelphia Semiconductor Index down 0.38%
Risk Asset Appetite May Wane
Sector Differentiation Expected Ahead of 2Q Earnings Season

The New York Stock Exchange (NYSE) on Wall Street, New York. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Last week in the U.S. stock market, cyclical stocks such as financials, consumer goods, and travel showed strength, while non-face-to-face (untact) related technology stocks exhibited weakness. The Philadelphia Semiconductor Index, which has a strong correlation with the domestic stock market, also underperformed. As a result, there is a forecast that profit-taking desires will increase in the KOSPI market, which has entered the 3300 era, especially centered on semiconductor stocks.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = On the 25th (local time), the U.S. stock market saw financial stocks and face-to-face consumer-related sectors strengthen due to the Federal Reserve's (Fed) stress test pass, expectations of increased dividends and share buybacks, and rising Treasury yields. This is expected to have a positive impact on domestic market investor sentiment. However, the Philadelphia Semiconductor Index fell by 0.38%, and the Dow Transportation Index dropped by 0.04%. The Russell 2000 Index, which focuses on small and mid-cap stocks, only rose by 0.03%, indicating that the preference for risk assets is unlikely to expand significantly. This is because the KOSPI entering the 3300 era may increase the desire for profit-taking.

Meanwhile, although financials and consumer goods showed strength in the U.S. stock market, large technology stocks and the semiconductor sector underperformed. Additionally, untact-related sectors lagged behind. Considering this, sector differentiation is also expected to proceed in the domestic stock market. This pattern is likely to continue for the time being ahead of the upcoming Q2 earnings season.

◆ Hyunki Chae, Economist at Cape Investment & Securities = While the KOSPI has reached the 3300 level, there is pressure on the upper bound of the index, but the lower bound is supported by earnings expectations. The market consensus for KOSPI's Q2 operating profit this year is about 50 trillion won, steadily rising from around 44 trillion won at the end of March. Since South Korea’s export volume is generally at a high level, the earnings improvement trend can continue until the end of the year. Accordingly, a gradual rise in the KOSPI index can be expected.

By sector, attention should be paid to the consumer discretionary sector. Starting next month, domestic social distancing policies will be eased, allowing private gatherings of up to six people, and restaurants and cafes can operate until midnight. Recently, due to concerns over the COVID-19 Delta variant, the reopening-related sectors within consumer discretionary have experienced some correction, but this should rather be seen as a buying opportunity for reopening sectors. Although South Korea’s daily COVID-19 cases are in the 500s, as the vaccination rate reaches the 50% range, the number of confirmed cases will gradually decrease. Until the vaccine effects are fully realized, reopening expectations are expected to continue.

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