[Good Morning Stock Market] "UK-Originated Uncertainty Eases... KOSPI Expected to Rise Around 1%"

UK Finance Minister Withdraws Tax Cut Plan
UK Financial Market Stabilizes
US Tech Stocks Rise
Positive Impact on Korean Stock Market

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the 18th, the Korean stock market is expected to start higher. This is likely influenced by the easing of financial market instability originating from the UK and the positive earnings reports from US banks, which led to a broad rise in the US stock market.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,185.82, up 550.99 points (1.86%) from the previous session. The S&P 500, centered on large-cap stocks, rose 94.88 points (2.65%) to 3,677.95, and the tech-heavy Nasdaq index closed at 10,675.80, up 354.41 points (3.43%).

Seo Sang-young, Head of Future Asset Securities "KOSPI Expected to Start Up Around 1%"

On the 18th, the KOSPI is expected to start with an increase of around 1%. The stabilization of the US stock market is anticipated to have a positive effect on the Korean stock market as well. This is because the large-scale tax cut plan in the UK, which had been cited as a cause of increased financial market volatility, was withdrawn.

After the newly appointed UK Chancellor of the Exchequer withdrew most of the recently announced tax cuts, the British pound surged sharply against the dollar. Additionally, UK government bond yields fell significantly, stabilizing the UK financial market. This acted as a factor for a weaker dollar and lower interest rates. Consequently, the US stock market rose, led by technology stocks.

The improving earnings of US banks also had a positive impact. The Bank of America (BOA) reported solid results with bond trading exceeding expectations, leading to a significant rise. Alongside this, some technology-themed stocks related to the metaverse and cloud sectors surged due to positive developments, which was favorable for the stock market.

The Korean stock market is also expected to benefit positively. In particular, the sharp rise in some metaverse and cloud-related stocks based on favorable factors is likely to increase buying interest centered on technology stocks, suggesting a solid performance among related stocks.

Meanwhile, the MSCI Korea Index ETF rose 3.15%, and the MSCI Emerging Markets Index ETF increased by 2.75%. The 1-month NDF USD/KRW exchange rate stood at 1,413.30 won, reflecting an expected 5 won decline at the start. Eurex KOSPI200 futures rose 1.21%.

Han Ji-young, Kiwoom Securities Researcher "Korean Stock Market Expected to Rise... Easing of UK Financial Instability"

On the 18th, the Korean stock market is expected to show an upward trend. The effects of the sharp rebound in the US stock market and the official withdrawal of the UK tax cut plan, which eased UK-originated financial instability, are expected to act as positive factors.

The recent macroeconomic negative factor causing stock market instability was the global strong dollar phenomenon. This is partly due to the Federal Reserve's (Fed) aggressive interest rate hikes, but European-originated instability also had a significant impact. The market has already priced in a 75 basis points (bp) increase at the November Federal Open Market Committee (FOMC) meeting (95% probability) and a likely 75 bp hike in December (68% probability). It seems difficult for the dollar's strength to shift to a downward trend in the near term. However, considering that the Fed's aggressive tightening is already reflected and UK-originated instability is easing, the dollar's further upside potential is expected to be limited.

Previously, the UK government announced a 45 billion pound tax cut plan but faced criticism over fiscal deterioration and policy discord with the central bank. There were even forecasts that the UK might require a bailout, which led to a sharp depreciation of the pound. However, on the previous day (local time), the UK Chancellor officially announced the cancellation of the income tax rate cut and the withdrawal of the tax cut policy through a short-term budget statement. This decision is believed to have contributed to the recovery of market risk appetite. It is important to view positively that the UK-originated instability, which accounted for a significant portion of recent market negatives, will not worsen to the worst-case scenario.

Currently, major countries including Korea and the US have entered the earnings season, where markets react sensitively to corporate results. As inferred from the sharp rise in BOA (+6.1%) stock price due to strong earnings reported the previous day, unless new factors emerge, sensitivity to existing macro issues is expected to decrease.

Meanwhile, the scheduled release of China's Q3 Gross Domestic Product (GDP), September retail sales, and industrial production data has been postponed. This is interpreted as a judgment that poor economic data during the Party Congress period would pose significant political burdens. Although the postponement of Chinese data may affect the domestic stock market, given the overall recovery of risk appetite, downward pressure on stock prices from China is expected to be low.

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