[Good Morning Stock Market] "KOSPI Expected to Start Slightly Higher... Volatility High but Incentive for Bargain Buying Increases"

[Asia Economy Reporter Kwon Jae-hee] On the 20th, the domestic stock market is expected to start with a slight rise. The U.S. stock market opened higher due to a rebound buying following recent declines, but the stock market turned downward after the Federal Reserve (Fed) announced in a report that it is striving to reduce inflation through an 'unconditional' approach. Early in the session, as volatility expanded and international oil prices plunged, the rise in government bond yields narrowed, leading to strength centered on large tech stocks; the Nasdaq rose by 1.43%, while the Dow Jones Industrial Average closed down by 0.13%.

◆ Sangyoung Seo, Head of Media Content Division at Mirae Asset Securities: "KOSPI Expected to Start Up Around 0.3%"

Last Friday, the Korean stock market fell more than 2% at one point due to concerns about a recession and a sharp drop in the U.S. stock market. However, the Fed's continued expression of confidence in the economy and the ongoing efforts to stimulate the economy, including China's consumption promotion policies, helped reduce the losses. Additionally, the Bank of Japan (BOJ) announced it would maintain its current accommodative monetary policy, unlike other countries, which was also positive. Nevertheless, large-scale selling by foreign investors prevented a rebound, and both the KOSPI and KOSDAQ closed down by 0.43% each.

Meanwhile, the U.S. stock market's increased volatility early in the session due to the Fed's aggressive monetary policy stance is expected to weigh on the Korean stock market. In particular, although the Fed expressed confidence in the economy, the indication of policies to 'unconditionally' control high inflation and Minneapolis Fed President Neel Kashkari, considered the most dovish, advocating a giant step (75bp hike) in July, are burdensome factors.

However, U.S. President Joe Biden's consideration of invoking the Defense Production Act to induce gasoline price declines and Russian President Vladimir Putin's announcement to increase fertilizer and grain exports are raising expectations for limiting price increases, which is positive for overall investor sentiment. In fact, related news led to a sharp drop in U.S. crude oil and wheat-related products last Friday, expanding the Nasdaq's gains. Considering this, the Korean stock market is expected to start up around 0.3% and maintain a solid performance, especially among tech stocks that have recently experienced significant declines.

◆ Jiyoung Han, Researcher at Kiwoom Securities: "Volatility is High but Incentives for Bargain Buying Increase... This Week's KOSPI Expected Range 2400~2520"

This week, our stock market is expected to be influenced by the aftereffects of the June Federal Open Market Committee (FOMC) meeting, key economic indicators such as Korean exports and major countries' manufacturing PMIs, remarks from Federal Reserve officials including Chairman Jerome Powell, and the MSCI inclusion decision (on the 24th). Although overall asset market volatility has increased, considering that valuation-wise incentives for bargain buying have risen, the market is expected to recover by raising the lows this week. The expected KOSPI band for this week is 2400 to 2520.

Immediately after the June FOMC, the market formed some relief by accepting the Fed's giant step as a given, but concerns are resurfacing that the Fed's tightening will cause a recession. In fact, during past rate hike periods, cases where the U.S. economy achieved a soft landing were fewer compared to those that led to a hard landing or recession, contributing to these concerns.

With inflation and tightening concerns, both the KOSPI and Nasdaq are threatening their long-term technical support at the 200-week moving average, so worries about breaking long-term trends are expected to persist this week. However, since the current domestic market valuation is near historical lows, incentives for entry rather than liquidation are increasing. From an earnings perspective, the KOSPI's Q2 operating profit was revised down by 0.2% compared to a month ago, but the 12-month operating profit was revised upward. Also, it is noteworthy that on the 17th, the KOSPI (-0.4%) significantly reduced intraday losses to close, and the Nasdaq (+1.4%) also succeeded in rebounding on the same day.

Meanwhile, from an industry perspective, during the recent market plunge, forced sales related to credit leverage have frequently appeared during the pre-market call auction and mid-session in the domestic market. These forced sales increase market volatility across various sectors but are largely unrelated to fundamentals. Therefore, when sharp price drops occur during the week due to forced sales in large-cap stocks within relatively favorable sectors such as secondary batteries, automobiles, and cyclicals, it seems appropriate to use these as buying opportunities.

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