Increased Downside Volatility Expected in Stock Market
KOSPI and KOSDAQ Credit Balance at 19 Trillion Won
US Stock Market Surges, High Possibility of Technical Rebound

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Cape Investment & Securities stated, "We expect the KOSPI weekly outlook for the last week of June to be between 2260p and 2450p."

The Research Center of Cape Investment & Securities analyzed on the 26th, "The combined credit balance of KOSPI and KOSDAQ remains high at 19 trillion won," adding, "If the stock market declines further, there is a possibility of increased downside volatility."

The Research Center explained, "Although positive news such as international oil prices moving in the $100 per barrel range may cause a temporary rebound in the stock market, the likelihood of this leading to a sustained upward trend is low."

In particular, they noted, "Since concerns about an economic recession have not been fully reflected, the domestic stock market is still in the stage of finding its true bottom," and judged, "In the short term, it is effective to respond with defensive sectors such as food and beverages and telecommunications until the release of the U.S. June CPI on July 13."

Regarding the particularly highlighted decline in the domestic stock market, the Research Center diagnosed, "Supply and demand issues, such as sell-offs due to forced liquidation, have played a larger role."

Meanwhile, they evaluated last Friday's sharp rise in the U.S. stock market as likely a technical rebound following the rapid decline in global markets over the past two weeks.

The Research Center explained, "As WTI prices dropped from the $110 range to the $100 range and the 10-year U.S. Treasury BEI (bond market's expected inflation) fell to the 2.5% range, it is judged that bargain buying entered due to eased inflation expectations."

They pointed out, "If the U.S. June CPI records an increase of over 8% year-on-year, inflation concerns may expand again, increasing interest rate volatility. Although some concerns about a U.S. economic recession mentioned by Chairman Powell have been partially reflected in the stock market, it is difficult to see them as fully reflected, so last week's rebound may not lead to a sustained trend."

The Research Center analyzed, "Considering the Fed's statement that a 'soft landing' of the economy is unlikely, the Fed is already assuming that an economic recession may occur this year if supply-side inflation is not resolved."

They continued, "The most likely time for the global stock market to escape this bear market is either when the U.S. economy enters a recession and the Fed considers reducing the intensity of tightening, or when the Russia-Ukraine war ends."

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