Continuous Inflationary Pressure... Reopening Is the Key

On the 1st, the KOSPI index started lower due to the sluggish U.S. stock market. Dealers are working in the dealing room of Hana Bank in Euljiro, Seoul. The won-dollar exchange rate opened at 1,185.0 won, up 1.0 won from the previous session, showing a steady trend. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] It is forecasted that the cautious stance in the stock market, triggered by the cold winds, will continue for the time being. Concerns are growing that rising inflation may act as a margin pressure on companies rather than a signal of economic recovery, leading to a subdued investment sentiment until a full-scale Re-opening occurs.

Samsung Securities projected in its stock market strategy for the second week of October (4th to 8th) that "the key factor will be whether Re-opening takes place."

Currently, in the global market, worries are increasing that persistent inflationary pressures could translate into increased corporate cost burdens. The detection of stagflation-like trends related to inflation clearly provides a pretext for realizing good profits.

This also raises uncertainty in monetary policy. There is no definitive answer as to whether the focus should be on a potentially recessionary economy or on rising inflation. If the U.S. Federal Reserve aims to demonstrate its role as an inflation fighter as it did in the 1970s, shocks from tightening are inevitable. However, additional easing under the current circumstances is also unreasonable, as it could further fuel already elevated inflation.

The critical issue is whether Re-opening occurs. The urgent task is the return of workers to industrial sites. Without catalysts such as the introduction of COVID-19 treatments, short-term solutions are difficult. However, the probability of this situation becoming structurally entrenched is considered low.

Seojeonghoon, a researcher at Samsung Securities' Investment Information Team, analyzed, "It is more advantageous to interpret the current fluctuations as a period of adjustment rather than a trend reversal, because an easing rally can be expected after passing through this volatility phase."

He added, "Assuming that the rise in raw materials and interest rates is a given constant for the time being, it is necessary to increase the weighting of sectors such as materials and finance, which can form a positive correlation with these factors. Also, since this can lead to increased demand in the service sector, attention to media & entertainment and gaming is required."

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