[Good Morning Stock Market] "October Export Decline Expected... KOSPI Starts Down Around 0.3%"

FOMC Giant Step Caution
US Stock Market Sees Selling Pressure Mainly in Tech Stocks
October South Korea Export Decline Outlook Adds Burden

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On the 1st, the Korean stock market is expected to start slightly lower. This is due to the decline in the US stock market centered on tech stocks the previous day. The October Korean export statistics to be released on the day are also unfavorable as they are expected to decrease compared to the previous year. The market is also dominated by caution ahead of this week's scheduled US Federal Open Market Committee (FOMC) meeting. With a giant step (raising the base interest rate by 0.75 percentage points at once) becoming a foregone conclusion, a limited stock price movement is expected.

On the previous day (31st) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,732.95, down 128.85 points (0.39%) from the previous session. The S&P 500, focused on large-cap stocks, closed at 3,871.98, down 29.08 points (0.75%), and the Nasdaq, centered on tech stocks, ended at 10,988.15, down 114.31 points (1.03%). The three major indices showed a strong rebound in October. The Dow rose 13.95% over the month, the highest increase since January 1976. The S&P 500 and Nasdaq also rose 8% and 3.9%, respectively, over the month. The decline in US stock prices on the day is interpreted as caution ahead of the regular FOMC meeting scheduled for November 1-2 (local time).

Seo Sang-young, Head of Mirae Asset Securities Division: "Korean Stock Market to Fall Around 0.3%... US Tech Stock Decline and Korean Export Statistics Burden"

[Image source=Yonhap News]

On the day, the Korean stock market is expected to start down about 0.3% and then enter a pause as it awaits the FOMC. Foreign investors' supply and demand influenced by the won-dollar exchange rate are expected to determine the index's direction.

The US stock market's selling pressure on tech stocks amid dollar strength ahead of the FOMC is a burden on the Korean stock market. There is a high possibility of selling pressure on tech stocks that led the Korean stock price rise the previous day.

The October Korean export-import statistics are also not favorable for the stock market. October exports are expected to decrease by 3% compared to the previous year. The 2023 KOSPI operating profit forecast has already been revised downward from the 270 trillion won level at the beginning of the year to 206 trillion won currently, mainly due to semiconductors. Although the earnings decline has been largely reflected, the export decrease to be announced today may further trigger downward revisions of Korean companies' earnings forecasts, raising concerns.

The MSCI Korea Index ETF fell 0.02%, and the MSCI Emerging Markets Index ETF dropped 0.17%. The 1-month NDF won-dollar exchange rate was 1,426.80 won, with the exchange rate expected to start up 2 won today. Eurex KOSPI200 futures closed flat.

Han Ji-young, Kiwoom Securities Researcher: "October Export Slump Expected... Limited Stock Price Movement"

On the 1st, the Korean stock market is expected to show limited price movement influenced by caution ahead of the November FOMC, the scheduled release of Korea's export data and China's Caixin Manufacturing Purchasing Managers' Index (PMI), and the dollar's flow. Korea's total exports for October are expected to decline due to weak external demand.

According to Bloomberg consensus, exports are estimated to fall 2.1% year-on-year but increase 2.8% month-on-month (September). Depending on the export performance of key items such as semiconductors, automobiles, petrochemicals, and secondary batteries, the stock market is expected to show differing price movements among related sectors.

China's October manufacturing PMI, released the previous day, was 49.2 (expected 49.8, previous month 50.1), and the services PMI was 48.7 (expected 50.1, previous month 50.6), significantly below expectations, indicating entry into a contraction phase. Amid this, due to a surge in COVID-19 cases in China, economic lockdown measures have resumed, including the lockdown of Foxconn, a major Apple supplier located in Zhengzhou, and the closure of Disneyland.

As the Q3 earnings season progresses, differentiated market trends are emerging depending on corporate earnings results. The market has now fully entered the influence zone of the November FOMC. As of the 31st, the Chicago Mercantile Exchange (CME) FedWatch tool shows an 86% probability of a 75 basis point hike at the November FOMC, making a 75bp increase highly likely. The key issue is December. Market participants are divided between a 75bp hike (49.7%) and a 50bp hike (44.5%) in December.

From December, as expectations for the Fed to slow the pace of policy tightenings spread, major stock markets including Korea and the US have used October as a rebound opportunity. However, the Wall Street Journal (WSJ), citing a San Francisco Fed paper, pointed out that the combination of "large government subsidies + central bank low interest rates" after COVID-19 increased household savings, pushing back expectations for a slowdown. This has created an atmosphere that the burden of aggressive Fed tightening will be low by reducing Americans' sensitivity to rate hikes. Since the market is also learning from the past Jackson Hole experience, it is appropriate to prepare for the possibility that uncertainty around the November FOMC will intermittently cause market volatility throughout this week.

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