This Week's Stock Market 'Jongmokjang Performance'... Focus on US and China Real Economy Indicators

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[Asia Economy Reporter Lee Seon-ae] This week, the domestic stock market is expected to show a boxed-in pattern with a stock-specific market.

On the 14th, the securities industry projected the KOSPI expected band for this week to be between 2850 and 3000 points. The domestic stock market is experiencing a double burden of global inflation concerns and supply outflows due to major shareholder capital gains tax avoidance, while downward revisions of corporate earnings for next year continue, resulting in a lack of clear upward momentum.

Lee Jae-seon, a researcher at Hana Financial Investment, analyzed, "There is concern over further earnings cuts in cyclical stocks due to the high level of commodity prices and the high inflation indicators centered on the G2 reflecting this. Inflation indicators will primarily need to confirm stabilization in China's inflation indicators, which play a role in exporting global inflation."

Kim Young-hwan, a researcher at NH Investment & Securities, said, "Individual investors have recorded net sales this month, which is judged to be due to supply outflows related to the year-end major shareholder capital gains tax issue," adding, "The market is facing a double burden of global inflation concerns and supply issues related to major shareholder capital gains tax avoidance, and these factors are unlikely to be resolved in the short term." However, he noted that individual selling to avoid taxes is a one-time event ahead of year-end, and inflation concerns are not a long-term negative factor as signs of easing production disruptions are emerging.

Park Seok-hyun, a researcher at KTB Investment & Securities, stated, "Considering that the sharp rise in inflation rates, expected to be limited to the 4th quarter, is becoming a revealed factor, the risk of further stock price adjustments may be limited," and added, "A strategy of holding or approaching at the bottom is necessary rather than selling."

The securities industry views that a stock-specific market centered on themes is inevitable due to the lack of clear momentum. Shin Seung-jin, a researcher at Samsung Securities, pointed out, "The thematic market continues where the mere mention of the word NFT causes the stock price of the related company to surge," adding, "It is a time when investors who do not hold companies related to the metaverse or NFT feel increasingly excluded."

Researcher Lee Jae-seon predicted, "Since many events of software companies are scheduled this week, it is highly likely that a theme-driven stock market will continue," and added, "In the short term, a strategy focusing on small and mid-cap stocks rather than large caps, and still seeing the trees rather than the forest, is necessary."

This week, a US-China virtual summit is scheduled. The summit on the 15th will be the first US-China virtual meeting since President Biden’s inauguration, drawing attention to whether the bilateral relationship will improve.

Shin Seung-jin of Samsung Securities said, "US President Joe Biden, whose approval rating has recently fallen, needs a turnaround card, and Chinese President Xi Jinping, who has completed preparations for long-term rule through the 20th Party Congress, has a timing to maximize political effects," adding, "If the deteriorating relationship between the two countries finds a clue for resolution, our market may also find a turnaround card."

Real economy indicators from the US and China will also be released. The US October retail sales, announced on the 16th, are expected to be strong and could serve as a factor to shift the market trend, which has been engulfed by inflation concerns. In China, slowdown signals will continue but the additional slowdown is not expected to be significant. China's October retail sales, announced on the 15th, are expected to increase by 3.8% year-on-year, remaining sluggish but not worsening further, according to experts.

Kim Yumi, a researcher at Kiwoom Securities, forecasted, "Although US and Chinese inflation indicators exceeded expectations, raising inflation vigilance, attention will be paid more to economic trends once major real economy indicators are announced."

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