[Good Morning Stock Market] "Mixed Close in US Stocks, Sector-Differentiated Market... KOSPI Attempts Rebound"

Meta surges nearly 20% in after-hours trading
Continued stock-specific differentiation based on earnings
Korean stock market expected to start with around 0.3% rise

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The U.S. stock market started higher but closed mixed amid concerns over economic slowdown. The Nasdaq, which had risen more than 1% during the session driven by some companies reporting strong earnings, turned lower ahead of the close. On the day, the Dow Jones Industrial Average and the S&P 500 rose 0.19% and 0.21% respectively, while the Nasdaq closed down 0.01%.

In particular, as earnings reports from major tech companies began in earnest, the market focused on corporate earnings, showing differentiated performance by stock. Microsoft (MS), which posted solid earnings and raised its guidance, surged 4.81%, boosting the software sector. Visa also jumped 6.47%, reporting better-than-expected results unaffected by inflation and supply chain disruptions, with continued recovery in travel spending due to economic reopening. Meanwhile, Meta, the parent company of the world's largest social media platform Facebook, fell 3.3% during regular trading ahead of its earnings announcement but surged nearly 20% in after-hours trading. Meta revealed in its earnings report immediately after the regular session that while earnings fell short of Wall Street expectations, the number of active users increased again.

Ultimately, the market appears to be undergoing stock differentiation aligned with the ongoing corporate earnings season rather than recent downward factors. Among the S&P 500 companies that have reported earnings so far, the proportion of earnings surprises exceeds 80%, suggesting that if the stock market focuses on earnings, it will likely have a positive effect.

Seosangyoung, Researcher at Mirae Asset Securities: "Domestic stock market to start up around 0.3%... Stability of KRW-USD exchange rate is key"

On the previous day, the domestic stock market initially fell nearly 2% on the KOSPI amid signs of a 'panic sell-off' as the Nasdaq plunged nearly 4%. However, the recent decline was largely seen as already priced in, leading to a rebound buying wave. Additionally, the Chinese stock market surged following President Xi Jinping's remarks on 'infrastructure investment,' helping to narrow the decline thanks to China-driven economic stimulus. With the earnings season underway and supported by companies reporting solid results, the Korean stock market closed down 1.10%.

Meanwhile, despite recent downward factors, the U.S. stock market's strength centered on companies reporting solid earnings during the earnings season is expected to have a positive impact on the Korean stock market. Furthermore, the Chinese government's expressed commitment to economic stimulus, which led to strength in related stocks in the U.S. market, is also a positive factor. The sharp rises in major companies such as Meta Platforms and Qualcomm after their earnings announcements post-market close are also encouraging.

Therefore, considering expectations for China's economic stimulus policy announcements and the full-scale earnings season, the domestic stock market is expected to show strength centered on individual stocks.

Of course, the ongoing weakness of the Korean won, with the KRW-USD exchange rate at 1,265 won, remains a burden as it could negatively affect foreign investor demand, limiting the extent of the rebound. Even considering that the won's weakness partly reflects some supply-demand factors, the attractiveness of the Korean stock market to foreign investors is not high.

Taking this into account, on the 28th, the domestic stock market is expected to start up around 0.3%, with changes depending on whether the KRW-USD exchange rate stabilizes. The movement of the Japanese yen following the Bank of Japan's monetary policy also warrants attention.

Han Ji-young, Researcher at Kiwoom Securities: "Buying momentum entering due to calming of U.S. stock market... Korean stock market to initiate rebound"

Although the panic selling-induced plunge on the 26th has calmed, the market continues to experience high volatility with daily fluctuations. The blackout period of communication between the Federal Reserve (Fed) and the market ahead of the May FOMC adds uncertainty regarding monetary policy, which is a burden.

However, considering that negative factors such as Fed tightening and China's lockdown measures have been reflected through price adjustments since April, and that the first-quarter earnings season in major countries is progressing well, the downward pressure from macroeconomic negatives on the stock market is expected to be limited.

Regardless of value or growth stocks, the market is placing more premium on earnings or future growth, so during the remaining earnings season, buying momentum is expected to flow into companies that present positive earnings forecasts beyond first-quarter results through the second and third quarters.

On the 28th, the domestic stock market is also expected to rebound due to buying momentum entering amid the calming of the U.S. stock market's plunge and perceptions of oversold conditions. Recently, the KRW-USD exchange rate has surpassed the 1,260 won level, intensifying the strong dollar and won weakness, negatively impacting foreign investor demand. However, the current exchange rate level may have overshot considering Korea's economic fundamentals and the Fed's tightening issues, so attention should be paid to intraday changes in the KRW-USD exchange rate. Additionally, Meta's approximately 20% surge in after-hours trading following its earnings announcement and daily active user growth news, along with Qualcomm's (1.2%) more than 5% rise in after-hours trading due to strong Android phone demand, are expected to positively influence investment sentiment toward related domestic stocks.

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