[Good Morning Stock Market] US Stocks Rise Together on Powell's Less Hawkish Remarks... "KOSPI Rebound Gains Momentum"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Jerome Powell, Chairman of the U.S. Federal Reserve, made less hawkish remarks that eased the shock caused by market concerns over an accelerated pace of tightening since the beginning of the year. When Chairman Powell suggested that the "balance sheet reduction (quantitative tightening)" could be considered later in the second half of the year than expected, investors welcomed the news, and the New York stock market closed higher across the board.

On the 11th (local time), the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 36,252.22, up 183.35 points (0.51%) from the previous day. The Standard & Poor's (S&P) 500 rose 42.75 points (0.92%) to 4,713.04, and the Nasdaq closed at 15,153.45, up 210.62 points (1.41%). Domestic market experts analyze that the Fed's less hawkish remarks could lead to a stronger Korean won, positively affecting foreign investor flows, and with recent upward revisions in earnings forecasts for domestic companies, the KOSPI is seen to have the conditions for a rebound.

◆ Lee Kyungsoo, Researcher at Hana Financial Investment= On the 10th, Samsung Electronics' earnings exceeded expectations, and the review reports on this have been the main reason for the recent upward revision of KOSPI earnings estimates. The day before, on the 9th, SK Hynix's outlook was also revised upward.

Ultimately, the upward revision in semiconductor sector profits contributed the most to the KOSPI earnings upgrade, and recently, sectors such as shipping, technology hardware (LG Innotek, Samsung Electro-Mechanics, etc.), construction, and shipbuilding have also seen their earnings forecasts for this year rise. This turnaround is expected to be positive for foreign investor flows and suggests that the KOSPI market may have bottomed out. Of course, the overall number of stocks with upward earnings revisions is not yet increasing. Since earnings differentiation is ongoing, alpha investing that focuses only on key improvements in earnings rather than broad index investment is considered more appropriate.

◆ Seo Sangyoung, Researcher at Mirae Asset Securities= Despite the fact that the number of declining stocks outnumbered rising stocks by more than three times in the domestic market the previous day, the KOSPI closed higher as foreign buying flowed mainly into the electrical and electronics sector. Notably, semiconductor exports increased by 23% year-on-year until the 10th of this year, and with TSMC’s Q4 earnings announcement, expectations for the semiconductor industry were highlighted, leading related stocks to lead the gains. Additionally, financial stocks rose on expectations of interest rate hikes due to the tightening policies of various countries worldwide.

Regarding the Fed’s quantitative tightening, which had been one of the recent market concerns, Chairman Powell’s less hawkish remarks suggesting a later implementation than expected are positive for the Korean stock market. This is expected to positively influence foreign investor flows by raising expectations for a decline in the USD/KRW exchange rate (strengthening of the Korean won).

In particular, the increased risk asset preference in commodity and foreign exchange markets is also expected to have a positive effect on overall investor sentiment improvement. Considering this, the Korean stock market is expected to start with about a 1% rise and then show a solid trend centered on stocks expected to improve earnings ahead of the full-scale earnings season.

◆ Han Jiyoung, Researcher at Kiwoom Securities= The remarks made by Chairman Powell at the Senate confirmation hearing were less hawkish than the market had anticipated based on the December FOMC minutes and subsequent expectations. While it is true that monetary policy normalization?moving from quantitative easing tapering to rate hikes to quantitative tightening?will be implemented within the year, it is important to note that Chairman Powell left room for adjusting the pace. Although the market predominantly expected quantitative tightening to occur immediately after the March rate hike or in early second half, Powell’s mention that the timing of quantitative tightening would be "later this year" was also a relief factor.

On this day, the domestic stock market is expected to rise, supported by the sharp rally in the U.S. stock market. Growth themes and sectors, which had experienced sharp declines due to sensitivity to recent Fed tightening concerns and interest rate changes, are also expected to show price resilience. However, the overall market momentum is not expected to be strong, as the market sentiment could undergo another reversal depending on the U.S. December Consumer Price Index (expected 7.1%) release on the 12th (local time), and this cautious sentiment may be reflected in the domestic market.

There is also a need to keep open the possibility of continued supply-demand pressure surrounding LG Energy Solution’s IPO at the end of January. It is judged that responding from a sector perspective rather than betting on index directionality will be more appropriate in January.

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