[Good Morning Stock Market] 'KOSPI Rise Expected'... No Clear Direction, Individual Stocks Market Focused on Short-Term Trading

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 19th, the domestic stock market is expected to start higher, but it is likely to lack clear direction. The market is anticipated to show a trend focused on individual stocks within a box range.

The New York stock market fell due to concerns over major companies' earnings and the impact of rising Treasury yields. On the 18th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,411.69, down 39.54 points (0.11%) from the previous session. The Standard & Poor's (S&P) 500 index fell 0.90 points (0.02%) to 4,391.69, and the tech-heavy Nasdaq index closed at 13,332.36, down 18.72 points (0.14%) from the previous session.

◆ Seo Sang-young, Researcher at Mirae Asset Securities= The Korean stock market started lower the previous day due to concerns about Ukraine and rising interest rates amid high inflation but narrowed losses based on the solid U.S. industrial production reported last Friday. Additionally, China's liquidity supply policy is positive. Since the easing of social distancing measures from the 18th, stocks related to reopening, including cosmetics, showed clear strength. Due to these changing factors, the KOSPI closed down 0.11%.

Meanwhile, despite the interest rate hike issues such as rising U.S. Treasury yields and a strong dollar, the ongoing earnings season and focus on individual stock issues led to a temporary intraday rebound in the U.S. market, which is positive for the Korean stock market. In particular, the Philadelphia Semiconductor Index rose 1.88% due to positive outlooks related to the data center industry, which is expected to drive strength in the semiconductor sector in the Korean market as well.

Of course, concerns about prolonged high inflation due to the Ukraine war remain a burden, but considering that these issues have already been reflected in the stock market, their impact is expected to be limited. Rather, it is forecasted that the market will show fluctuations based on changes in individual stock groups during the earnings season. Today, the Korean stock market is expected to start about 0.3% higher, with the semiconductor sector showing solid performance and leading the index. However, since the market is expected to move without clear direction and focus on individual stocks, short-term trading is likely to be emphasized.

◆ Han Ji-young & Kim Se-heon, Researchers at Kiwoom Securities= The KOSPI closed slightly lower the previous day, showing sectoral differentiation ahead of the full-scale earnings season. The People's Bank of China's reserve requirement ratio cut was smaller than market expectations, weak Chinese retail sales data, and continued sharp rises in U.S. interest rates acted as downward pressures, resulting in a weak trend. However, with major companies such as Netflix, Tesla, and NAVER scheduled to announce earnings this week, expectations for the earnings season and buying interest centered on sectors expected to benefit from the full lifting of social distancing measures helped reduce the decline in the KOSPI.

By sector, food and beverage, distribution, and transportation equipment rose, while internet, finance, and construction sectors fell. Due to reopening expectations, cosmetics and food and beverage sectors such as LG Household & Health Care (+3.0%) and Daesang (+2.3%) rose. Hyundai Motor (+0.9%) and Kia (+2.0%) increased on expectations of improved product mix, higher selling prices, and favorable exchange rate effects. SK Innovation (+4.1%) surged on expectations of strong earnings due to rising oil prices. Samsung Electronics (+0.2%) showed limited movement amid continuous selling pressure from foreign and institutional investors.

Currently, there are no new negative factors, but existing negative factors such as the Ukraine crisis and Federal Reserve tightening continue to sustain rising market interest rates and a strong dollar. This macro environment poses vulnerabilities to the stock market, but as inferred from the previous trading day's U.S. market movements, the market seems to be developing some resilience. The possibility of intensified fighting in the Donbas region between Russia and Ukraine keeps energy prices such as natural gas at high levels, which is a concern. This could prolong debates over the inflation peak and further spread concerns about the Fed's tightening measures in response.

However, attention should be paid to the St. Louis Fed President, who is at the hawkish end, stating after the U.S. market close that a 75 basis point rate hike is not the base scenario. This suggests that from the Fed's perspective, a rate hike of more than 50 basis points at once carries significant policy risks that could exacerbate economic slowdown. Considering this, it is expected to help calm further rises in market interest rates from this point onward. Despite external uncertainties, the domestic market, which showed weakness the previous day, is expected to rebound as the U.S. market's intraday rebound and focus on individual earnings issues attract market attention. The strong performance of financial stocks like BOA (+3.4%) and the Philadelphia Semiconductor Index (+1.9%) in the U.S. market is also expected to provide a favorable supply-demand environment for related domestic stocks.

Meanwhile, the domestic market has been dominated by net selling from foreigners, limiting the index's upside mainly among large-cap stocks, resulting in an individual stock market. Within this, rotation trading is occurring mainly among stocks with low valuations or lacking supply, regardless of whether industry conditions are visibly improving (e.g., among reopening-related sectors). While rotation trading can be an alternative for alpha generation in a box range market, the current rotation speed tends to be faster than previous rotation markets, so it is considered appropriate to avoid market timing trading strategies in response.

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