[Good Morning Stock Market] US Stocks Weaken Amid Jackson Hole Caution and Strong Dollar... KOSPI Expected to Start Lower

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Myung-hwan Lee] On the 23rd, the domestic stock market is expected to start lower due to the influence of the U.S. stock market, which closed down ahead of the Jackson Hole meeting.

On the 22nd (local time) at the New York Stock Exchange (NYSE), the S&P 500 index closed at 4,137.99, down 2.14% (90.49 points) from the previous trading day. The Nasdaq index, centered on technology stocks, fell 2.55% (323.64 points) to 12,381.57, and the Dow Jones Industrial Average dropped 1.91% (643.13 points) to 33,063.61. The S&P 500 and Nasdaq indices recorded their largest declines since June 16.

Investors are presumed to have shown caution ahead of this week's scheduled Jackson Hole meeting. Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), is scheduled to deliver a speech on the topic of "Economic Outlook" at the Jackson Hole meeting on the 26th, drawing market attention ahead of the September Federal Open Market Committee (FOMC) meeting.

The trend of the dollar's strength also appears to be a factor to watch. In the Seoul foreign exchange market the previous day, the won-dollar exchange rate closed at 1,339.8 won, up 13.9 won from the previous trading day. During the afternoon session, the exchange rate rose to 1,340.2 won per dollar, up 14.3 won from the previous day's closing price. The exchange rate surpassing 1,340 won is the first time in about 13 years and 4 months since April 29, 2009, when it reached 1,357.5 won (high price) during the financial crisis. The euro also showed weakness against the dollar, falling to 0.9924 dollars, dropping below 1 dollar.

The dollar's strength is pointed out as potentially having a negative impact on corporate earnings. According to Mirae Asset Securities, if the dollar appreciates by more than 15% compared to the previous year, corporate profits tend to slow down within 1 to 4 quarters thereafter. Accordingly, U.S. corporate profits are expected to record a negative growth compared to the previous year in the first half of next year. Technology stocks, in particular, are significantly affected by the dollar's strength.

Sang-young Seo, Head of Media Content Division at Mirae Asset Securities: "U.S. stock market fell mainly on technology stocks... KOSPI expected to start lower"

On the 23rd, the domestic stock market is expected to start down by around 0.7%. However, considering the strong willingness of the Chinese government to stimulate the economy and the solid U.S. economy, the decline is expected to be limited rather than expanding.

The U.S. stock market's decline, centered on technology stocks due to the impact of the strong dollar, is expected to have a negative effect on the Korean stock market. In particular, amid concerns about an aggressive Fed, semiconductor stocks broadly declined, with the Philadelphia Semiconductor Index falling 3.72%, and the small- and mid-cap Russell 2000 Index dropping 2.13%, increasing psychological pressure, which is also a negative factor.

Of course, one of the causes of the U.S. stock market decline?the issue of Russia's suspension of natural gas supply to Europe?had already affected the Korean stock market the previous day, so the possibility of a further decline is not high. Additionally, the causes of the strong dollar and the sharp rise in U.S. Treasury yields are not newly emerging issues but have been continuously influencing the market recently. While volatility may increase ahead of the Jackson Hole meeting, the possibility of it continuing is also limited.

Ji-young Han, Researcher at Kiwoom Securities: "Weak trend expected due to U.S. correction... Adjustment pressure not large"

On the 23rd, the domestic stock market is expected to show a weak trend under the influence of macro uncertainty amid further adjustments in the U.S. stock market. It should be noted that foreign investors' net buying, which had continued even during the recent rise in the won-dollar exchange rate, may turn into net selling if the current exchange rate level rises further.

However, the valuation attractiveness of the KOSPI remains valid, and since Korea had a lower beta (volatility) compared to the U.S. stock market during the recent rebound rally phase, the adjustment pressure is expected to be relatively small. Although there is still time until the Q3 earnings season, attention should be paid to the exchange rate effect on export stocks such as automobiles, semiconductors, and home appliances. Considering that the current average exchange rate for Q3 is in the 1,310 won range, which is higher than the previous quarter, market interest in the exchange rate effect, which had retreated after the Q2 earnings season, is expected to rise again.

The Jackson Hole meeting is increasingly seen as a venue where Fed Chairman Powell will show a more hawkish stance than previously expected. Until last week, the consensus for the September FOMC was a 0.5 percentage point rate hike, but it has now shifted to a 0.75 percentage point increase.

The global strong dollar is partly due to the dollar's own strength amid uncertainties surrounding the Jackson Hole meeting, but it also stems from the weakness of other currencies against the dollar, such as the breakdown of the 1:1 parity between the euro and the dollar. Currently, the market is highly sensitive not only to inflation but also to global economic growth.

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