This Week's KOSPI Outlook: 'Growing Cautious Sentiment Ahead of the Start of the Earnings Recession'... Holding Rather Than Selling Off

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Following the aftershocks of the Jackson Hole meeting, the domestic stock market, which ended its bear market rally (a rise during a bear market) last week (August 29?September 2), is expected to face downward pressure this week (September 5?September 8) as it enters the early stages of an earnings recession. With the Jackson Hole meeting confirming the U.S. Federal Reserve's (Fed) strong stance on interest rate hikes, major events such as the U.S. August Consumer Price Index (CPI) release on the 13th and the Federal Open Market Committee (FOMC) meeting on the 20th?21st are on the horizon. Additionally, the U.S. Labor Day holiday on the 5th and the Chuseok holiday closure of the domestic stock market will likely increase investors' cautious sentiment. The investment strategy advice is to maintain a defensive portfolio and hold rather than engage in panic selling.

On the 4th, the securities industry forecasted that the KOSPI would completely end its bear market rally this week and face downward pressure. The expected KOSPI range is generally between 2350 and 2450. According to the Korea Exchange, on the last trading day, September 2, the KOSPI closed at 2409.41, down 6.20 points (0.26%) from the previous trading day (2415.61). The KOSDAQ ended trading at 785.55, down 2.44 points (0.31%) from the previous day (788.32).

Researcher Na Jung-hwan of Cape Investment & Securities analyzed, "Concerns that the pace of inflation easing may be slower than expected and the diminished expectations for a Fed pivot have acted as downward pressure factors on the domestic stock market."

For the time being, cautious sentiment is inevitable. Researcher Kim Young-hwan of NH Investment & Securities explained, "The point at which we can be confident about the inflation peak-out is expected to be after mid-November when October data is released, and it is difficult to be confident in September."

Yumi Kim, head of the investment strategy team at Kiwoom Securities, said, "It seems unlikely that the Fed's hawkish stance on monetary tightening will change significantly," adding, "Fed Chair Jerome Powell is expected to reaffirm his hawkish position at a conference related to monetary policy."

The strong dollar phenomenon is also a factor increasing downward pressure on the domestic stock market. Kim Dae-jun, head of the investment strategy team at Korea Investment & Securities, said, "The exchange rate has surpassed a psychological resistance level, creating room for further increases," and added, "If the won-dollar exchange rate rises further, foreign investors' investment in the domestic stock market will decrease, which will act as a negative factor for the Korean stock market."

NH Investment & Securities recommended maintaining a defensive portfolio focused on structurally growing stocks unrelated to the economy, policy beneficiaries, and defensive stocks. Researcher Kim Young-hwan said, "With the enactment of the U.S. Inflation Reduction Act and the Chips and Science Act, a global supply chain restructuring is expected in advanced industries, which is unfavorable for Korea, given its high intermediate goods export ratio and the impact of U.S.-China relations," but added, "There may be sectors that benefit and suffer by industry, and opportunities can be found in the secondary battery and renewable energy sectors."

Samsung Securities, which expects the KOSPI to show a neutral to below-neutral trend between 2350 and 2450, recommended holding rather than panic selling. Researcher Kim Yong-gu of Samsung Securities emphasized, "Holding is preferable to panic selling, and strategic trading with a mid- to long-term perspective is better than aimless waiting." He added, "It is necessary to prepare for a time battle based on current stock prices and valuations," and "Portfolio restructuring based on inflation risk hedging potential, earnings, and policy momentum is required."

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