"The Stock Market Slump Will Continue for a While... The Turning Point Is After September"

Securities Firms Lower KOSPI Band for August and Second Half

"Downward Adjustment Inevitable Due to Uncertainty Fear
Must Watch FOMC for Tapering Timing and Speed"

[Asia Economy Reporter Minji Lee] As the KOSPI experiences a sharp decline amid concerns over early tapering (asset purchase reduction) triggered by the U.S., attention is focused on how long the downward trend will continue. Securities firms are also leaving open the possibility of downward adjustments to the KOSPI forecast band.

On the 20th, a review of the August KOSPI bands by major securities firms' research centers showed that the lowest point of the August KOSPI forecast band was lowered from 3100 points to 3090 points. Daishin Securities initially presented the August forecast band as 3200?3380 but revised it to 3090?3270 considering the index decline. While major securities firms such as Shinhan Investment Corp. did not adjust the August index band, they suggested that, given the increased uncertainty around tapering, it is necessary to keep the lower end of the index open for the second half of the year and respond accordingly.

The KOSPI closed at 3097.83 on the previous day, down 1.93% (61.10 points) from the previous trading day, falling below the 3100 mark for the first time in four months. Compared to the KOSPI's highest point recorded in June (3316.08), this represents a decline of about 6.6%.

The index decline is the result of multiple overlapping negative factors. Domestically, concerns about economic normalization have increased due to a sharp rise in COVID-19 cases amid the fourth wave of the pandemic. In the semiconductor DRAM sector, debates over peak conditions have led to significant capital outflows from major stocks such as Samsung Electronics and SK Hynix. Additionally, the global economic momentum peak-out perspective centered on the U.S., along with sudden regulatory measures by the Chinese government targeting sectors such as platforms, bio-healthcare, private education, and real estate, have negatively affected the index. Furthermore, fears that the Federal Reserve's tapering, initially expected in the first quarter of next year, could occur within this year have accelerated the index's decline.

Experts predict that the sluggish trend will continue for the time being due to a lack of positive factors. Even after the Jackson Hole meeting on the 26th next week, where the Fed's stance on tapering will be confirmed, further adjustments are expected. KB Securities has presented a September KOSPI forecast band of 2970?3290, while eBest Securities anticipates the index could approach the 2900 level in the second half of the year.

The timing of the index rebound is expected to be after the September Federal Open Market Committee (FOMC) meeting, when the timing and pace of tapering become clearer. Yoon Ji-ho, head of the eBest Securities Research Center, said, "The stock price adjustment period will continue for a considerable time and will show a gradual decline rather than a crash as profit growth slows," adding, "The end of September FOMC and early October Samsung Electronics' earnings announcement, which will provide direction for the semiconductor sector, will be key turning points going forward."

However, there are also opinions cautioning against excessive fear regarding the tapering process. It is expected that the 'taper tantrum' phenomenon, like that in May 2013, which the market currently fears, will not occur. At that time, emerging market indices fell about 9%, and the KOSPI dropped about 5%, but the current tapering situation is somewhat different. Han Ji-young, a researcher at Kiwoom Securities, said, "Tapering has been a factor since early this year, and the Fed is fully aware of the market impact," adding, "It is expected that the policy normalization process will not cause significant shocks as in the past, so large-scale capital outflows from emerging markets and stock market instability will not occur."

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