[Good Morning Stock Market] KOSPI Expected to Start Lower... Foreign Demand Negative Amid Dollar Strength

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] On the 12th, the domestic stock market is expected to start lower. This is because the strong dollar is anticipated to have a negative impact on foreign investors' supply and demand.

The previous day, the U.S. stock market closed lower across the board ahead of major companies' Q2 earnings announcements. It is estimated that concerns over rising commodity prices and their burden on corporate earnings led to the decline in indices. On the 11th (local time), the Nasdaq index, focused on technology stocks, closed at 11,372.60, down 2.26% (262.71 points) from the previous trading day. The Dow Jones Industrial Average fell 0.52% (164.31 points) to 31,173.84, and the Standard & Poor's (S&P) 500 index closed at 3,854.43, down 1.15% (44.95 points).

Sangyoung Seo, Head of Media Content at Mirae Asset Securities: "KOSPI to start lower... Attention needed on foreign investors' supply and demand"

On the 12th, the Korean stock market is expected to start down about 0.7%, with the direction to be determined by the scale of foreign selling due to the weak Korean won. Considering that this week is the stock market options expiration day, attention should also be paid to foreign futures trends.

The U.S. stock market's decline amid concerns over earnings and the expanding strength of the dollar ahead of the earnings season is a burden on the Korean stock market. Particularly, selling pressure centered on technology stocks emerged due to heightened concerns over the resurgence of COVID-19 in China. The COVID-19 resurgence concerns in China are also expected to negatively impact the Korean stock market.

Additionally, Russia's suspension of natural gas supply under the pretext of pipeline maintenance has further expanded the European recession issue, which is another negative factor. This triggered weakness in the euro, causing the euro's value against the dollar to fall to levels seen 20 years ago. As the dollar strengthened, the offshore non-deliverable forward (NDF) won-dollar exchange rate exceeded 1,310 won, expanding the weak won trend and negatively affecting foreign investors' supply and demand, which is also a burden.

Jaewon Choi, Researcher at Kiwoom Securities: "Downward pressure centered on growth stocks... Positive outlook for automobile and semiconductor sectors"

On the 12th, the domestic stock market is expected to face downward pressure mainly on overextended growth stocks that had shown strength, due to the sharp decline in the Nasdaq the previous day. However, the possibility of further upward revisions to consensus has emerged due to expectations of a Q2 earnings surprise from Hyundai Motor and Kia, and the fact that Techwing, a semiconductor equipment company, recorded a Q2 operating profit surprise the previous day, which is expected to positively influence related sectors' stock prices.

On the 11th, the domestic stock market showed weakness in the airline and leisure sectors due to concerns over the COVID-19 resurgence, and adjustments were seen mainly in consumer goods sectors that had benefited from inflation. It is believed that profit-taking and rebalancing are underway ahead of the U.S. June Consumer Price Index (CPI) confirmation.

Reflecting concerns that the rate hike magnitude may be larger than previously expected, the yield curve inversion between the U.S. 10-year and 2-year Treasury bonds continues. Amid ongoing concerns about inflation and recession, the U.S. Q2 earnings season begins on the 12th with PepsiCo. Earnings results reflecting rising commodity prices, increased costs due to wage hikes, and consumption contraction are expected to influence the stock market direction during the week.

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