[Good Morning Stock Market] Weak Dollar Due to High US Unemployment Rate... KOSPI, Rising Expectations for Foreign Investor Inflow

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] On the 7th, the domestic stock market is expected to start with an increase of around 1% and continue to show strength centered on large-cap stocks. The U.S. stock market rose, supported by a significant weakening of the dollar following the October employment report, which showed more job creation than expected despite high unemployment rates and a slowdown in wage growth. This is expected to have a positive impact on our stock market as well. In particular, the semiconductor sector led the rise due to this dollar weakness, with the Philadelphia Semiconductor Index surging by 4.60%, which is expected to improve investor sentiment toward semiconductor stocks. Additionally, the dollar's weakness causing the won-dollar exchange rate to fall by about 16 won, reinforcing the won's strength, is also expected to positively influence foreign investor demand.

On the previous trading day, the New York stock market closed higher after five days, buoyed by strong October employment data. The Dow Jones Industrial Average closed at 32,403.22, up 1.26% from the previous session. The Standard & Poor's (S&P) 500 index rose 1.36% to 3,770.55, and the Nasdaq index increased by 1.28% to 14,752.5. All three major indices returned to an upward trend after five trading days. However, over the week, the Dow fell by 1.4%, while the S&P 500 and Nasdaq dropped approximately 3.4% and 5.7%, respectively.

The U.S. stock market showed particular strength in technology stocks, with semiconductor-related shares such as Nvidia (5.48%), Micron (5.01%), and Lam Research (6.64%) rising strongly, supported by the expanding dollar weakness. The Philadelphia Semiconductor Index rose 4.60%. Cloud software company Twilio (-34.61%) plunged after announcing revenue forecasts that fell short of expectations. Apple (-0.36%) declined after news that the Foxconn Zhengzhou plant's operating rate remained in the 70% range, leading to an expected decrease of 2 to 3 million iPhone shipments in the fourth quarter. Tesla (-3.64%) fell as much as 6% intraday following reports that Elon Musk faced a large lawsuit related to Twitter employee layoffs and announcements that many advertisers had left Twitter.

◆ Seo Sang-young, Head of Media Content at Mirae Asset Securities: "KOSPI expected to rise about 1.5% initially, then maintain a strong trend centered on large-cap stocks"

[Image source=Reuters Yonhap News]

The KOSPI index is expected to start with an increase of about 1.5% on the 7th.

Last Friday, the Korean stock market fell due to the Bank of England mentioning a recession in the UK and the resulting dollar strength, but the Chinese and Hong Kong stock markets surged on expectations of a possible change in the zero-COVID policy, improving investor sentiment and turning the market upward. In particular, the resulting yuan strength expanded, and the won also showed strength, which led to net buying inflows by foreigners in both spot and futures markets. Supported by this, the KOSPI rose 0.83%, while the KOSDAQ closed down 0.03% due to net selling by foreigners and institutions.

Meanwhile, the U.S. stock market's rise, supported by a solid employment report but accompanied by a weakening dollar due to high unemployment and slowing wage growth, is expected to have a positive effect on our stock market. Especially, the semiconductor sector led the rise amid this dollar weakness, with the Philadelphia Semiconductor Index surging 4.60%, which is expected to improve investment sentiment toward semiconductor stocks.

Furthermore, the dollar's weakness causing the won-dollar exchange rate to fall by about 16 won and the firm continuation of the won's strength trend is favorable. This is expected to positively affect foreign investor demand. Although intraday volatility in the U.S. stock market is a concern, related news has already been continuously reflected, so the impact is expected to be limited. Considering this, our stock market is expected to rise about 1.5% initially and then maintain strength centered on large-cap stocks.

◆ Han Ji-young, Researcher at Kiwoom Securities: "Weekly KOSPI range expected between 2260 and 2390 points... Focus on eco-friendly theme stocks amid U.S. midterm election impact"

This week, besides the U.S. Consumer Price Index (CPI) announcement, a major event?the midterm elections?is pending. Polls suggest that the Republican Party is likely to control both the Senate and the House of Representatives. Currently, the Republicans broadly agree with the Biden administration's policies, so the policy stance is expected to be maintained. However, if the Republicans become the majority in both chambers, detailed policy changes related to the Inflation Reduction Act (IRA), tax increases, and the debt ceiling pursued by the current administration may occur. This could affect the stock prices of eco-friendly theme stocks such as automobiles, solar power, and secondary batteries in the domestic market.

Meanwhile, the expectation for China's zero-COVID policy, which contributed to the strength of Chinese and domestic Chinese consumption theme stocks last Friday, is expected to enter a temporary lull. At one point, foreign media such as Bloomberg created an atmosphere suggesting the end of the zero-COVID policy, but on the 5th, Chinese epidemic prevention authorities stated in a regular briefing that the zero-COVID stance would be maintained. The existing forecast that the zero-COVID policy will be gradually eased until the National People's Congress in March next year remains valid, but it is judged appropriate to prepare for increased price volatility, especially in the stocks that were heavily influenced by zero-COVID expectations at the beginning of the week.

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