[Good Morning Stock Market] Jackson Hole Meeting and Upcoming BOK Monetary Policy Meeting... Should We Pay Attention to Beneficiaries of Exchange Rate Increase?

The won-dollar exchange rate started at 1,326.0 won on the 19th, up 5.3 won from the previous trading day (1,320.7 won), at the Hana Bank dealing room in Jung-gu, Seoul. On the same day, the KOSPI opened at 2,510.72, up 2.67 points (0.11%) from the previous trading day. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Myunghwan Lee] On the 22nd, the domestic stock market is expected to start slightly lower and then focus on foreign investors' supply and demand. This is because the high exchange rate is anticipated to affect foreign investors' sentiment.

On the recent trading day, the 19th, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1,325.9 won per dollar, 5.2 won higher than the previous day's closing price. This is the second-highest level this year after 1,326.1 won on the 15th of last month. During trading on the 19th, the won-dollar exchange rate even rose to 1,328.8 won, marking the highest level this year.

Although the high exchange rate is expected to weaken foreign investors' investment sentiment, securities firms advise paying attention to sectors and companies that benefit significantly from the rising exchange rate.

Attention should also be paid to the upcoming Jackson Hole meeting and the Bank of Korea's Monetary Policy Committee (MPC) this week. The Jackson Hole meeting has previously provided important turning points in monetary policy, so investors' interest is expected to be focused. At the Bank of Korea MPC, a 0.25 percentage point interest rate hike is anticipated, and the key issue will be whether the won's depreciation will stabilize.

Seokhwan Kim, Researcher at Mirae Asset Securities: "KOSPI expected to start lower... Need to focus on sectors benefiting from exchange rate rise"

On the 22nd, the KOSPI is expected to start down about 1%, and amid weakening foreign investor sentiment, attention should be paid to stocks benefiting from the rising exchange rate.

In the domestic stock market, sectors sensitive to exchange rate fluctuations such as IT (electrical electronics and display), secondary batteries, automobiles, and shipbuilding should be watched for supply and demand improvements. In fact, on the 19th, foreign investors concentrated their net purchases in these sectors. The correlation between the won-dollar exchange rate and the KOSPI has shown a very strong negative correlation of -0.92 since 2021. The offshore won-dollar exchange rate surpassed 1,330 won, reaching the highest level since 2009. Although the rising exchange rate is negative from the perspective of foreign investor supply and demand, it is expected to contribute to the growth of companies' scale by boosting exports, which is a mainstay of the Korean economy. Therefore, it is necessary to pay attention to sectors and companies that benefit greatly from the exchange rate increase.

The U.S. stock market, which had experienced the longest rally since November last year, turned down after six weeks, showing signs of uncertainty about future market direction. On the 19th (local time), when about $2 trillion worth of options expired, the S&P 500 index failed to break through the key threshold of 4,300, leading to selling pressure as investors reduced existing positions. Additionally, expectations for key factors such as the inflation peak theory, the possibility of the U.S. Federal Reserve (Fed) cutting benchmark interest rates, and strong second-quarter corporate earnings weakened, strengthening investors' preference for safe-haven assets.

Kyoungmin Lee, Researcher at Daishin Securities: "Focus on Jackson Hole meeting and Bank of Korea MPC... KOSPI support test at 2450~2470"

The Jackson Hole meeting scheduled for the 25th to 27th (local time) this week is important. In particular, Fed Chair Jerome Powell's speech is scheduled for the 26th. Since the meeting has previously provided important turning points in monetary policy, investors' attention is focused. The main theme of this Jackson Hole meeting is "Reassessment of constraints on the economy and policy." It is expected that there will be many discussions about constraints in conducting monetary policy and tightening. This means various constraints such as inflation or economic slowdown may be mentioned.

On the 25th, the Bank of Korea MPC will be held. A 0.25 percentage point interest rate hike is expected, along with the announcement of economic and inflation forecasts. With additional rate hikes already factored in, there is a high possibility that expectations for a slowdown in the pace of monetary policy will emerge alongside downward revisions to economic forecasts and upward revisions to inflation forecasts. In this case, it is expected to support the rebound momentum of the relatively underperforming domestic stock market compared to global markets. It is important to see whether the pressure on short-term won depreciation will ease along with the narrowing interest rate gap with the U.S.

Until the early to mid part of this week, the KOSPI is expected to test support levels around 2450 to 2470 due to concerns about inflation and tightening, dollar strength, and a sharp rebound in bond yields. Afterwards, a virtuous cycle among inflation, monetary policy, and the economy is expected to restart, leading to a further technical rebound in the KOSPI. In this case, short-term trading may be possible focusing on sectors that are undervalued relative to earnings and have gained short-term price merits during the rebound phase since July and the recent decline phase. These sectors include semiconductors, software, automobiles, apparel, and IT hardware.

Even if the KOSPI continues to attempt additional rebounds, it is advisable to refrain from aggressive investment. For short-term trading as well, it is effective to keep target returns low and investment horizons short. This is because the third-quarter rebound is unlikely to be a trend reversal. The third-quarter technical rebound is seen as a short-term price and valuation normalization phase due to falling bond yields during the transition from a reverse financial market to a reverse earnings market.

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