[Good Morning Stock Market] Is the Late 'Summer Rally' Starting?

KOSPI Rises for 5 Consecutive Trading Days
US Stock Market Also Surged Last Friday

On the 28th, the KOSPI index opened at 2437.57, up 0.91% (22.04 points) from the previous trading day, as dealers were working in the Hana Bank dealing room in Euljiro, Seoul. The won-dollar exchange rate started at 1306 won, down 7.3 won. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] As the peak vacation season began on the 1st of this month, market attention is focused on whether a belated 'Summer Rally' will emerge. The Summer Rally refers to the summer rebound phenomenon that occurs when fund managers buy stocks before going on vacation in June and July. Recently, the stock market has been showing an upward trend due to predictability regarding the pace of U.S. monetary tightening and the inflow of foreign investors into the Korean stock market.

According to the Korea Exchange on the 1st, the KOSPI recorded an upward trend over the past five trading days. As a result, the KOSPI, which had been fluctuating around the 2400 level, has now settled at the 2400 mark.

The U.S. stock market is also on the rise. Last Friday (29th), despite high inflation, the U.S. stock market showed an upward trend driven by strong earnings from companies such as Apple (3.28%) and Amazon (10.36%). The energy sector, including Chevron (8.90%), also showed strength by reporting solid earnings. Consequently, the Dow closed up 0.97%, Nasdaq 1.88%, S&P 500 1.42%, and Russell 2000 0.65%, all finishing higher.

Sangyoung Seo, a researcher at Mirae Asset Securities, stated, "The U.S. stock market's rise, supported by strong corporate earnings despite high inflation, is expected to have a favorable impact on the Korean stock market." He predicted a positive start for the Korean stock market on the day.

However, he noted, "Despite the weak dollar, the rise in the won-dollar exchange rate highlights won weakness, which is a burden," and analyzed, "Negative factors such as the U.S.'s negative growth and the Chinese government's passive economic stimulus measures could also have adverse effects."

He anticipated that after the market opens higher, it would react sensitively to economic indicators such as Korea's export-import statistics and China's Caixin Manufacturing PMI.

On the 28th, the KOSPI index opened at 2,437.57, up 0.91% (22.04 points) from the previous trading day, as dealers were working in the Hana Bank dealing room in Euljiro, Seoul. The won-dollar exchange rate started at 1,306 won, down 7.3 won. Photo by Moon Honam munonam@

In the Korean stock market, the movements of foreign investors are notable. Since mid-month, foreign investors have been net buyers of over 2 trillion won in the KOSPI, leading the market's support.

In particular, there are forecasts that foreign investors' short-selling attacks will shift starting next month. Foreign investor supply and demand and short-selling transactions form a clear inverse correlation. However, short-selling transactions show a distinct seasonality, peaking in August and then trending downward until the end of the year.

Yonggu Kim, a researcher at Samsung Securities' Global Investment Strategy Team, said, "This pattern has been observed since 2008," adding, "It is analyzed that after August, there is an acceleration of buybacks and loan repayments related to short-selling." This phenomenon is attributed to foreign investors focusing their supply and demand response around the simultaneous expiration of futures and options in September, followed by stable position rollovers and early profit-taking (Book-closing). Additionally, the need to secure voting rights and dividend rights before the shareholder registry closure in the second half of the year is cited as a factor causing urgent changes in foreign investors' behavior.

Besides this, the domestic stock market is expected to be influenced by debates over the U.S. entering a recession, domestic exports, key economic indicators such as the U.S. ISM Manufacturing PMI and employment data, earnings of major domestic and international companies, and whether OPEC+ will decide on additional production increases at its meeting. Ji-young Han, a researcher at Kiwoom Securities, suggested a weekly KOSPI expected range of 2380 to 2520.

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