Big Event Week... Domestic Stock Market Holds Its Breath

Today US Economic Indicators Released, Waiting for June 26 FOMC and June 27 Jackson Hole Meeting
KOSPI Eyes Rebound After Breaking Below 3100 Level

[Asia Economy Reporter Song Hwajeong] Last week, the KOSPI fell below the 3100 level due to concerns over U.S. tapering (asset purchase reduction). This week, big events such as the interest rate hike decision and the U.S. Jackson Hole meeting are scheduled, drawing attention to their potential impact on the stock market. Experts believe that the effects of the interest rate hike have already been somewhat reflected in the market, and that uncertainties will ease through the Jackson Hole meeting.

As of 10:20 a.m. on the 23rd, the KOSPI recorded 3,092.93 points, up 32.42 points (1.06%) from the previous day. It has turned upward after three days and is attempting to recover the 3100 level.

The stock market, which briefly rose earlier this month, sharply declined due to concerns over a slowdown in the semiconductor industry. It fell for eight consecutive trading days from the 5th to the 17th. This marks the first time in about two years and ten months that the KOSPI has fallen for eight straight trading days. The semiconductor industry slowdown and the strong dollar led to continued foreign selling, and with early tapering concerns emerging, the stock market helplessly gave up the 3100 level. Han Jiyoung, a researcher at Kiwoom Securities, said, "Last week, the KOSPI fell 3.5% compared to the previous week, marking the largest drop since January this year, and the KOSDAQ plunged 7.0%, the largest drop since September 2020," adding, "This week, with the earnings season momentum entering a lull, the market will be influenced by macro events such as the Jackson Hole meeting and manufacturing PMI indicators from the U.S. and Europe."

Particularly drawing attention is the Jackson Hole meeting, as a concrete stance on early tapering may be announced. Jerome Powell, Chair of the Federal Reserve (Fed), is scheduled to deliver a virtual speech on "Economic Outlook" at 10 a.m. local time on the 27th at the Jackson Hole meeting. Prior to this, Robert Kaplan, President of the Dallas Federal Reserve Bank and considered a hawkish member within the Fed, said on the 19th, "We are carefully monitoring the impact of the Delta variant, and if it slows economic growth, we may need to somewhat adjust our policy views." Kaplan had originally advocated for a tapering announcement in September and implementation in October.

Labor Gil, a researcher at NH Investment & Securities, said, "Even hawkish figures have acknowledged the influence of the Delta variant, creating room to slow the tapering pace," adding, "Investors expected to get tapering hints from Powell's speech at the Jackson Hole meeting, but the atmosphere has changed due to the spread of the Delta variant. It is unlikely that the tapering schedule will be specified at the Jackson Hole meeting."

Kim Jungwon, head of investment strategy at Hyundai Motor Securities, explained, "Powell is expected to be more cautious about changes in monetary policy at the Jackson Hole meeting," adding, "Due to the Delta variant's impact, the start of tapering is more likely to be delayed from an announcement at the September U.S. Federal Open Market Committee (FOMC) meeting to as late as December or early next year." He added, "Despite concerns about economic slowdown, the highlighted uncertainties related to tightening could ease quickly."

U.S. economic indicators to be released this week are also noteworthy. Kim Daejun, a researcher at Korea Investment & Securities, said, "It is necessary to watch the U.S. Market PMI scheduled for the 23rd and durable goods orders released on the 25th," adding, "Current forecasts indicate a trend reversal, but we need to see whether it is strong or weak. If the final figures are worse than expected, expectations for economic recovery will weaken, and it may take time for the stock market sentiment to turn around."

Domestically, the Bank of Korea's Monetary Policy Committee meeting is scheduled for the 26th, with attention focused on whether interest rates will be raised. Researcher Kim said, "The market is particularly more interested in future actions than this decision by the Monetary Policy Committee," explaining, "An interest rate hike in August has already been reflected in stock prices, and depending on whether there are additional hikes within the year, the direction of domestic interest rates could change, which in turn could determine market sentiment and relative sector strength."

With major events scheduled, the stock market is expected to remain cautious. Researcher Han said, "Considering Korea's economic fundamentals and corporate earnings trends, last week's sharp drop in the domestic stock market and the rapid rise in the won-dollar exchange rate were excessive," adding, "A technical price rebound is expected early this week, but since macro events need to be digested, it will proceed more as a bottoming process rather than a trend V-shaped rebound."

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