[Good Morning Stock Market] "Expectations of Inflation Slowdown and Strong US Stock Market... Will KOSPI Attempt a Rebound?"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jaehee] On the 24th, the KOSPI index is expected to start with a slight rise. The US stock market the previous day expanded gains after digesting weak economic indicators and Federal Reserve (Fed) Chair Jerome Powell mentioned at the House hearing that a recession is not inevitable. However, some Fed officials advocating aggressive rate hikes led to selling pressure, raising concerns about the economy. As a result, sectors such as finance, energy, semiconductors, and industrials declined, while consumer staples, healthcare, and some large tech stocks showed strength, leading to sector differentiation. The three major US indices closed higher: Dow Jones (0.64%), Nasdaq (1.62%), and S&P 500 (0.95%).

By sector, utilities (2.3%), healthcare (2.2%), and real estate (2%) showed strength, while energy (-3.7%), materials (-1.4%), and industrials (-0.5%) were weak. Major large-cap stocks like Apple (2.16%), Alphabet (0.68%), and Amazon (3.2%) rebounded, but concerns over semiconductor demand slowdown surfaced, causing the Philadelphia Semiconductor Index to fall 0.65%, with Nvidia (-0.83%) and Micron (-0.21%) also showing weakness.

◆ Seosangyoung, Head of Media Content Division at Mirae Asset Securities: "KOSPI to start up around 0.3%... Focus on transportation, IT hardware, and healthcare sectors"

On the 24th, the KOSPI index is expected to start with an increase of around 0.3%. The Korean stock market fell the previous day amid increased volatility caused by supply and demand factors from individual investors. Particularly, the KOSDAQ experienced a large decline. Despite the US stock market remaining robust, recession concerns surfaced, leading to continued foreign selling of spot stocks, which negatively affected supply and demand. Additionally, Morgan Stanley sharply lowered its target price for Micron and released a negative report on semiconductor sector earnings, causing related stocks to weaken. As a result, the KOSPI closed down 1.22% and the KOSDAQ down 4.36%.

Meanwhile, the US stock market's rise, confirming Fed Chair Powell's confidence in the economy, is positive for the Korean market. Although recession concerns persist and intraday volatility is expected to continue, the strength shown in stocks expected to have solid earnings even during a recession is likely to create a favorable atmosphere centered on related stocks in the Korean market. In particular, sectors such as transportation, IT hardware, and healthcare, which continue to see upward revisions in operating profit forecasts, deserve attention.

Also, the won-dollar exchange rate exceeded 1300 won the previous day, expanding the won's depreciation, which is attributed to the highlighted global recession issue, showing a nearly 9% depreciation compared to the beginning of the year. This is similar to the 7-9% depreciation seen in the euro, pound, and Taiwan dollar. Ultimately, the won-dollar exchange rate surpassing 1300 worsened investment sentiment toward the Korean market the previous day, but it is important to note that this is not unique to Korea. This is a normal reaction to some supply and demand factors and the global recession issue. Considering this, the Korean market may see increased volatility early in the session due to individual investors' supply and demand factors but is expected to stabilize over time.

◆ Han Jiyoung, Researcher at Kiwoom Securities: "KOSPI attempts rebound... Use as a buying opportunity for fundamentally strong stocks"

With the won-dollar exchange rate entering the 1300 won range the previous day, panic selling spread, and the domestic stock market, which repeatedly hit new lows, is expected to attempt a rebound, supported by expectations of easing inflation due to falling global commodity prices and the strong US stock market.

However, a factor limiting the rebound is the expected continued outflow of credit forced sales, a unique supply and demand negative factor to the domestic market, which has been more vulnerable compared to other markets. According to domestic media on the previous trading day, the number of accounts with insufficient credit collateral at major securities firms has surged. Although not all accounts with insufficient collateral will trigger forced sales, supply and demand volatility is expected to increase from the market open.

Amid heightened market caution regarding forced sales, there is an opinion that the burden of forced sales will be relieved only when the current approximately 19.5 trillion won (KOSPI 10.4 trillion won, KOSDAQ 9.1 trillion won) falls to the pre-COVID-19 pandemic three-year average level of about 9.5 trillion won. Although the possibility of additional outflows is high, considering that the credit balance ratio is about 35% compared to the deposit balance (currently 56 trillion won), which is a type of standby buying power, and this is not significantly different from the pre-pandemic three-year average of around 38%, excessive fear of large-scale credit forced sales should be avoided. Furthermore, it is considered appropriate to use stocks that have experienced sharp price drops due to supply and demand factors, such as secondary battery materials and PCB companies that plunged together due to presumed forced sales on the previous trading day, as buying opportunities in a market with increased forced sales risk, especially when there is no change in earnings or fundamentals.

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