[Good Morning Stock Market] KOSPI Expected to Start Higher Amid Eased Recession Concerns... Possibility of Technical Rebound

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] On the 11th, the KOSPI is expected to continue its upward trend after a slight rise at the start. This is because the U.S. June employment data exceeded expectations, somewhat easing concerns about an economic recession.

However, despite the strong employment data, the U.S. stock market closed mixed due to concerns over the Federal Reserve's (Fed) potential interest rate hikes. On the recent trading day, June 8 (local time), the Nasdaq index, focused on technology stocks, closed at 11,635.31, up 0.12% (13.96 points) from the previous trading day. The Dow Jones Industrial Average fell 0.15% (46.40 points) to 31,338.15, and the Standard & Poor's (S&P) 500 index dropped 0.08% (3.24 points) to 3,899.38.

The upcoming regular meeting of the Bank of Korea's Monetary Policy Committee (MPC) scheduled for July 13 is also expected to influence the market. The MPC is likely to decide on an unprecedented big step (a 0.5 percentage point increase in the base interest rate at once) at this meeting. If the Bank of Korea takes a big step at the July MPC, it will mark the third consecutive rate hike.

Sangyoung Seo, Head of Media Content Division at Mirae Asset Securities: "Recession concerns ease... MPC 'Big Step' possibility limits gains"

On the 11th, the domestic stock market is expected to continue its strong performance after starting with an increase of around 0.5%, driven by positive foreign demand expectations. However, the rise is expected to be limited as the market awaits major variables this week, with changes anticipated based on individual stock issues.

Although the U.S. stock market closed mixed near the flat line due to solid employment data, the easing of recession concerns is expected to have a positive impact on the domestic market. Recently, recession concerns have been a major topic in the market. However, the U.S. employment data confirming the Fed's aggressive rate hike stance remains a burden. Nevertheless, the weak dollar has caused the offshore non-deliverable forward (NDF) won-dollar exchange rate to drop significantly, increasing the possibility of won strength, which is expected to positively influence foreign demand.

However, uncertainties remain regarding the U.S. Consumer Price Index (CPI) results on the 13th and the possibility of a 0.5 percentage point base rate hike by the Bank of Korea's MPC on the same day, which is expected to limit gains.

Kyoungmin Lee, Researcher at Daishin Securities: "KOSPI technical rebound has started... rebound momentum expected"

The technical rebound of the KOSPI is judged to have already started and is ongoing since last week. In the short term, the key is whether the KOSPI can recover and stabilize around the important support zone of 2380?2400. If the index quickly recovers this range, despite short-term fluctuations, the rebound is expected to continue up to the first technical rebound target of 2650. The KOSPI has already absorbed domestic supply-demand issues and distressed sell-offs, and with its undervaluation appeal highlighted, a stronger trend compared to global markets is expected.

Foreign and institutional investors in the domestic market are also focusing on oversold stocks. Foreign investors turned net buyers last week with net purchases of 336 billion won, marking their first net buying in five weeks. They concentrated their buying on sectors such as semiconductors, IT home appliances, healthcare, energy, automobiles, chemicals, secondary batteries, pharmaceuticals/biotech, and automotive industries.

Starting next week, global recession concerns that have recently triggered volatility in the global financial markets are expected to ease significantly. The surprise index of economic indicators is positioned near its lowest point since the financial crisis, suggesting that positive results rather than shocks are likely to be released, and the market is expected to interpret this positively.

The upcoming economic data releases from the U.S. and China this week are also expected to support the technical rebound of global stock markets, including the KOSPI. The vicious cycle of inflation pressure, high-intensity tightening concerns, and recession that have triggered volatility in global financial markets since early this year is likely to weaken.

Every action has a reaction. Global stock markets have been heavily suppressed due to the reproduction of existing negative factors and a decline in investor sentiment. Once this suppressing force weakens, global stock markets could rebound at any time. The KOSPI, which has been more strongly suppressed than other financial markets or global stock markets, is expected to have strong rebound momentum.

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