[Good Morning Stock Market] Ahead of Midterm Elections, US Stocks Rise and Won Strengthens... "KOSPI Expected to Start Higher"

[Image source=AP Yonhap News]

[Asia Economy Reporter Myunghwan Lee] On the 8th, the domestic stock market is expected to show a solid performance influenced by the rising U.S. stock market ahead of the midterm elections and the won's strengthening trend.

On the 7th (local time), the Dow Jones Industrial Average closed at 32,827.00, up 1.31% (423.78 points) from the previous trading day in the New York stock market. The S&P 500 index rose 0.96% (36.25 points) to 3,806.80, and the Nasdaq index closed up 0.85% (89.27 points) at 15,564.52.

The U.S. stock market is facing the midterm elections scheduled for the 8th and the Consumer Price Index (CPI) announcement on the 10th. Generally, midterm elections are perceived as positive for the stock market, but concerns about a recession are growing, raising worries about increased political uncertainty. However, it is also advised to pay attention to the fact that such political uncertainty could lead to a weaker dollar trend.

Some expect that if the Republican Party gains the majority in the House, resulting in a split Congress, it could halt Democratic-favored legislation such as the Inflation Reduction Act (IRA), which would be positive for the stock market.

Sangyoung Seo, Head of Media Content at Mirae Asset Securities: "U.S. stock market rose ahead of midterm elections... Domestic stock market expected to remain solid"

[Image source=Reuters Yonhap News]

On the 8th, the KOSPI is expected to start with a rise of around 0.5% and maintain a solid performance ahead of the U.S. midterm election results.

The U.S. stock market showed strength in most sectors based on a weaker dollar ahead of the midterm elections, which is expected to have a positive impact on the Korean stock market. However, the electric vehicle and renewable energy sectors showed weakness.

In particular, considering the Non-Deliverable Forward (NDF) won-dollar exchange rate, the continued won strengthening trend is expected to positively influence foreign investor demand following the previous trading day, acting as a factor to improve investment sentiment.

If the Republican Party gains control of Congress through the midterm elections, the intention to stimulate the economy through tax cuts may increase, which could positively affect the export-dependent Korean stock market. However, despite the dollar's weakness, the rise in government bond yields ahead of the CPI announcement remains a burden.

Jiyoung Han, Researcher at Kiwoom Securities: "Rise driven by won strength... Sectoral differentiation expected"

On the 8th, the domestic stock market is expected to show an upward trend due to the won's strengthening effect, with the offshore won-dollar exchange rate entering the 1,300 won range. However, caution related to the U.S. midterm elections and CPI is also entering the market, leading to a differentiated market among some sectors such as automobiles and eco-friendly industries due to issues surrounding changes to the Inflation Reduction Act.

Although the overall stock market environment has become more favorable, it is necessary to prepare for the possibility of increased market volatility depending on the results of the U.S. midterm elections scheduled for the 8th and the U.S. CPI results on the 10th. Historically, midterm elections have shown an average rise after the election, but it should be considered that actual movements immediately after individual elections have varied depending on the market environment at the time.

The KOSPI has recorded six consecutive weekly gains on the chart basis since hitting a low of 2,155.49 on September 30, rising above the 20-week moving average. Since the KOSPI experienced a stair-step decline after attempting and failing to break above the 20-week moving average in January, June, and September, whether it can firmly establish above the 20-week moving average will be a key factor in technically gauging the short-term trend.

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