KOSPI Not Yet Bottomed, This Week "Watch for a Brief Rally... Intense Battle at 2200"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Despite the shock of the U.S. Consumer Price Index (CPI) exceeding expectations, the domestic stock market, which recovered the 2200 level in one day influenced by the rebound in the U.S. stock market, is expected to continue the fierce '2200 battle' this week as well. Given the persistent domestic and international uncertainties surrounding the market, volatile conditions are likely to continue.

On the 16th, the securities industry forecasted that the KOSPI would continue to experience volatility this week and maintain the battle around the 2200 level. Kim Young-hwan, a researcher at NH Investment & Securities, who suggested a weekly expected band for the KOSPI of 2090 to 2210, cited the possibility of a recession becoming a reality as a downward pressure factor for the KOSPI. Kim said, "We are currently in the early to mid-phase where actual economic slowdown is being confirmed, so it is not yet a time with high visibility on the economic bottom," adding, "From a macro perspective, it is difficult to expect economic stimulus from the Federal Reserve (Fed) due to high inflation, and from a micro perspective, rising prices and wages are increasing corporate cost burdens, which is making things difficult for companies and investors."

Accordingly, many advise caution against further declines. The prevailing view is that if high inflation persists, the Fed will maintain a strong tightening stance, which will burden the stock market. Kim Sung-geun, a researcher at Mirae Asset Securities, said, "Although the stock market has rebounded, it is expected to be limited," adding, "The September CPI results suggest that inflation may be declining more slowly than expected and that the Fed's hawkish stance will last longer."

Seo Jeong-hoon, a researcher at Samsung Securities, pointed out, "As confirmed in the September U.S. CPI, underlying inflationary pressures remain persistent, and if the Fed needs to tighten further, it is difficult to easily predict the upper limit of interest rates," adding, "Ultimately, from a problem-solving perspective, continuous signals of inflation decline are necessary, and the inflation ripple effects due to winter energy price trends will also be a subject to watch closely."

Na Jeong-hwan, a researcher at Cape Investment & Securities, evaluated, "With the Fed's high-intensity tightening policy continuing until December, the stock market is likely to remain in a box range until the end of the year."

Lee Kyung-min, a researcher at Daishin Securities, also emphasized, "From a long-term perspective, this is only short-term relief sentiment, and the reason for expecting price stability is based on economic deterioration and recession such as sluggish consumption and a sharp cooling of the housing market," adding, "The global financial market is still reacting sensitively to inflation and monetary policy, which means it has not escaped the main cause of the initial decline, so caution is needed against the possibility of further declines due to fundamental variables such as economic recession and earnings slowdown."

Meanwhile, the KOSPI closed at 2212.55 on the 14th, the previous trading day, up 49.68 points (2.30%) from the previous day’s close of 2162.87. The KOSDAQ ended trading at 678.24, up 26.65 points (4.09%) from the previous day’s 651.59. Starting the week around the 2190 level, the KOSPI fell to the 2160 level on the 13th amid heightened caution ahead of the U.S. CPI announcement, but after the CPI release, buying momentum centered on foreign investors who interpreted it as a signal of peak inflation pushed the index back above 2210 on the last day. The KOSDAQ also dropped to the 650 level but managed to record a rise of over 4% at the end.

The main drivers of the KOSPI rally were foreign investors. Foreigners alone net purchased 918.3 billion won worth of shares, supporting the index. During the same period, individuals and institutions sold 592.6 billion won and 367 billion won respectively, exerting downward pressure on the KOSPI. In the KOSDAQ market, institutions bought 125.6 billion won worth, and foreigners purchased about 0.5 billion won. Meanwhile, individuals also showed net selling of 167.3 billion won in the KOSDAQ market.

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