[Good Morning Stock Market] "All Three Major US Indexes Close Up Over 2%... KOSPI Expected to Start Higher"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] On the 22nd, the Korean stock market is expected to start slightly higher, buoyed by the strong performance of the U.S. stock market the previous day. Despite weak economic indicators, the U.S. market saw a rebound buying wave following recent declines, highlighting oversold sentiment, with all three major New York stock indices closing up around 2%: Dow (2.15%), Nasdaq (2.51%), and S&P 500 (2.45%).

In particular, the semiconductor sector, which had been sluggish recently, showed strength, with the Philadelphia Semiconductor Index rising 2.75%, which is favorable. Additionally, news that many companies have joined forces to create a forum for establishing metaverse standards and will hold a meeting in July is expected to positively impact semiconductor companies by increasing demand due to the expansion of related industries. Accordingly, the Korean stock market is also expected to show solid performance centered on the semiconductor sector. However, concerns about the economy remain high, and continued selling by foreign investors could be a burden.

◆Sangyoung Seo, Head of Media Content Division at Mirae Asset Securities: "Korean Stock Market to Start Up Around 0.7%... Expect Solid Performance Centered on Semiconductors"

The Korean stock market started higher the previous day, influenced by the strong European markets as concerns about a recession eased. The rebound buying following recent declines was also a factor supporting the rise. However, in the late session, the Chinese market turned down due to profit-taking, leading to some selling pressure and partial retracement of gains. The continued selling by foreign investors based on economic concerns was also a burden. Ultimately, on the 21st, the Korean market closed up 0.75% on the KOSPI and 1.09% on the KOSDAQ.

Meanwhile, the strong performance of the U.S. market, driven by highlighted oversold sentiment, is positive for the Korean market as well. Furthermore, the semiconductor sector, which had been weak recently, surged with the Philadelphia Semiconductor Index jumping 2.75%, which is favorable. Notably, the news that many companies including MS, Meta Platforms, and Nvidia have united to form a forum for metaverse standardization and will hold a meeting in July raises expectations for increased semiconductor demand due to industry expansion, acting as a positive factor for semiconductor-related stocks.

Concerns about the economy remain high, and foreign investors may continue to sell. Additionally, the Federal Reserve’s (Fed) plan to maintain aggressive rate hikes considering economic resilience is also a burden. However, the rebound buying sentiment remains, and at the current time, expectations for Fed Chair Powell’s congressional hearing on monetary policy today may also boost sentiment. Therefore, the Korean stock market is expected to start up around 0.7% and show solid performance centered on the semiconductor sector.

◆Jiyoung Han, Researcher at Kiwoom Securities: "Expected to Start Higher Supported by Major Countries’ Market Rebounds... Focus on Secondary Battery-Related Stocks"

Although risky assets such as stocks and cryptocurrencies rebounded in the previous trading day, asset price volatility remains high, and inflation and recession concerns have not been fully alleviated, casting doubt on the bottoming theory of major stock markets. In this context, opinions have emerged that a ‘capitulation sell-off’?where market participants in Korea and the U.S. engage in large-scale stop-loss selling?is necessary for the market to bottom out. Moreover, despite undergoing price adjustments comparable to a quasi-financial crisis beyond the pandemic, the fact that market stabilization mechanisms such as sidecars and circuit breakers were not triggered during the KOSPI’s decline from the 3300 peak to the 2400 range seems to support the capitulation sell-off view.

However, unlike many past cases where short-term crashes led to bear markets, major stock markets have experienced a stair-step decline since the second half of last year. Given that large-scale selling has occurred frequently during this process, concerns about the emergence of a potential capitulation sell-off are considered excessive. Of course, concerns about Fed tightening and the resulting renewed recession fears could increase downward pressure on indices from a supply-demand perspective, but this possibility is expected to be limited. Furthermore, according to the Chicago Mercantile Exchange (CME) FedWatch, the probability of a 75 basis point hike at the July Federal Open Market Committee (FOMC) meeting is approaching 90%, indicating that the market has largely priced in fears of an additional giant step.

Therefore, today, the Korean stock market is also expected to rise, supported by rebounds in major markets such as the U.S. and Europe. Although pessimism has not completely disappeared, leaving room for further declines, considering the KOSPI valuation (forward PER 8.83 times, forward PBR 0.87 times), betting on pessimism at this point is deemed ineffective. From a sector perspective, considering that electric vehicle-related stocks such as Tesla (+9.4%) and NIO (+9.2%) in the U.S. market surged sharply due to expectations of increased sales from strong demand, it is expected that domestic electric vehicle and secondary battery-related stocks will be positively influenced today.

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