Will the KOSPI Bear Market Rally Continue on the First Day of August... Securing Upward Momentum

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[Asia Economy Reporter Lee Seon-ae] The KOSPI index recovered the 2450 level last week after rising for five consecutive trading days. This week, attention is focused on whether the market can continue its bear market relief rally, driven by expectations of a peak in inflation and the Federal Reserve's (Fed) policy outlook.

According to the Korea Exchange on the 31st, the KOSPI index closed last week (July 25-29) by recovering the 2450 level. The daily closings were ▲ July 25: 2403.69, up 10.55 points (0.44%) from the previous day ▲ July 26: 2412.96, up 9.27 points (0.39%) ▲ July 27: 2415.53, up 2.57 points (0.11%) ▲ July 28: 2435.27, up 19.74 points (0.82%) ▲ July 29: 2451.50, up 16.23 points (0.67%). The factors behind this week's KOSPI rise include expectations of inflation peaking and preemptive sentiment on economic recession. Despite the U.S. 'Giant Step' rate hike and a contraction in second-quarter GDP, domestic stock markets are expected to maintain a mild upward trend. However, experts advise monitoring negative factors such as export slowdown and the resurgence of COVID-19.

The securities industry forecasts the KOSPI trading range for the first trading day of August to be between 2360 and 2520.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "The stock market has secured upward momentum from inflation peaking and Fed policy expectations," but cautioned, "However, since Korean exports are closely linked to KOSPI earnings, indicators suggest that downward revisions to earnings forecasts may continue."

Kim Yong-gu, a researcher at Samsung Securities, said, "Investors' perspectives are changing regarding the near-bottom stock prices and valuation merits, as well as the pre-reflected negative factors and unreflected positive factors," adding, "The extreme valuation discount caused by the global interest rate peak is expected to gradually ease, which will drive further market gains in August."

However, voices remain that it is still too early to expect a sustained upward trend. Kim Yumi, a researcher at Kiwoom Securities, said, "For the upward trend to continue, the PER (price-to-earnings ratio) multiple that stimulated the index rebound must rise, but in the still unstable market environment, PER increases may be unexpectedly sluggish," noting, "For the PER multiple to rise, inflation must clearly peak and central banks must slightly retreat from their policy stance, which is premature at this time."

Below is the schedule for major economic indicator releases.

▲ August 1 = South Korea July exports, South Korea July imports, U.S. July ISM Manufacturing Index, China July Caixin Manufacturing PMI, China July Caixin Services PMI, Europe June Unemployment Rate

▲ August 2 = South Korea July Consumer Price Index, U.S. Fed's Evans speech

▲ August 3 = U.S. June Durable Goods Orders, U.S. June Capital Goods Orders excluding Aircraft, U.S. June ISM Services Index, U.S. Fed's Bullard speech, Europe June Producer Price Index, Europe June Retail Sales

▲ August 4 = Europe ECB Economic Outlook publication

▲ August 5 = U.S. July Nonfarm Payrolls, U.S. July Unemployment Rate, U.S. July Average Hourly Earnings, U.S. Fed's Mester speech, Japan June Household Spending

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