[Good Morning Stock Market] "KOSPI Starts Up, Momentum Limited... Mid-Session Impact from June Exports"

Expected Start with Decline in Won-Dollar Exchange Rate
June Domestic Export Data Scheduled... Impact in Late Trading Session
US May Core PCE 4.7%... Inflation Slowdown Anticipated

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the 1st, the KOSPI is expected to start higher. The Korean stock market is anticipated to show an upward trend based on the stabilization of foreign demand amid the won's appreciation. However, key economic indicators such as June's domestic exports and China's Caixin Manufacturing PMI, which will be announced in the morning, are likely to influence the market direction in the latter part of the trading session.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 37,775.43, down 253.88 points (0.82%) from the previous session. The S&P 500, focused on large-cap stocks, ended at 3,785.38, down 33.45 points (0.88%), and the tech-heavy Nasdaq closed at 11,028.74, falling 149.16 points (1.33%).

Sangyoung Seo, Head of Mirae Asset Securities: "KOSPI to start up about 1%... Stabilization of foreign demand"

Sangyoung Seo, Head of Mirae Asset Securities, stated, "The KOSPI is expected to start with an increase of around 1%." Seo evaluated, "Although the US stock market initially plunged, the narrowing of losses during the session due to growing expectations of an inflation peak is positive for the Korean stock market."

He explained, "Of course, concerns about two consecutive quarters of negative growth in the US have highlighted recession issues, which is a burden. However, considering that these issues have been largely priced in, the impact is expected to be limited."

Seo also assessed that there is no need to worry about the decline in the semiconductor sector. He analyzed, "Although Micron, which recently contributed to the decline, reported better-than-expected earnings, its negative guidance has caused after-hours declines. However, this has also been factored in, so stability is expected."

Seo forecasted, "The MSCI Korea Index ETF rose 0.07%, the MSCI Emerging Markets Index fell 0.47%, and the 1-month NDF won-dollar exchange rate is at 1,287.44 won. Reflecting this, the exchange rate is expected to start down by 12 won."

Meanwhile, the core PCE (Personal Consumption Expenditures) price index for May recorded 4.7% year-on-year, significantly exceeding the Federal Reserve's target of 2.0%. However, it has been steadily slowing since February (5.3%), suggesting that inflation is easing.

However, Seo evaluated that the sustained rise in service-related prices, which recorded a 4.7% year-on-year increase, and food prices, which rose 11.0% year-on-year, are burdens as the upward trend continues to expand.

Seo analyzed, "The possibility of prolonged high inflation remains high, which means the Fed's aggressive rate hike stance is unlikely to weaken significantly."

Jiyoung Han, Researcher at Kiwoom Securities: "Limited rebound momentum... Impact of inflation caution sentiment"

Jiyoung Han, a researcher at Kiwoom Securities, predicted, "The domestic stock market, which had plunged due to aftershocks from secondary battery-related bad news and volatility related to rebalancing, will attempt a rebound with technical buying inflows. However, the sharp drop in the US stock market and inflation caution sentiment will limit the rebound's momentum."

Han forecasted, "Since major economic indicators such as Korea's June exports (expected 3.8%, previous 21.3%) and China's Caixin Manufacturing PMI (expected 50.1, previous 48.1%) are scheduled to be announced before mid-session, the index direction in the latter part of the session will be determined based on these results."

Regarding the semiconductor sector, which plunged the previous day, Han analyzed, "The perception of excessive decline and valuation entry attractiveness remain valid. Considering that Micron presented guidance worse than expected but is showing a slightly weak price movement within about 1% in after-hours trading, this will be a neutral factor for domestic semiconductor stocks."

[Image source=Yonhap News]

Regarding the May core PCE inflation (4.7%, expected 4.8%), Han diagnosed that despite a slowdown compared to the previous month (4.9%), the market still has not formed expectations of an inflation peak.

Han evaluated, "After the May 4th quarter PCE inflation decline (4.9%, March 5.2%), there was a short-term relief rally, but the shock from the May CPI announcement in mid-June, which led to consecutive sharp declines, seems to have affected investor sentiment."

He also explained, "The Fed is currently relying on headline inflation and inflation expectations covering all items rather than core inflation excluding energy and food due to the special situation of high inflation. This is believed to have caused the May core PCE inflation decline to be perceived as a neutral or below-neutral factor."

He added, "Until the June CPI (expected 8.3%, May 8.6%) data to be announced on the 13th is confirmed, uncertainty about the inflation peak is expected to remain in the market."

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